REITs and Commercial Real Estate Investments
Saturday, Jan. 7, 2023 8:00 AM - 10:00 AM (CST)
- Chair: Andreas Christopoulos, Yeshiva University
On the Value of Information Signals by Peer Investors: Evidence from Commercial Real Estate Redevelopment
AbstractWe investigate how institutional commercial real estate investors adapt their investment decisions according to tangible localized information signals provided by other peer investors. We find that investors are more likely to implement buy-to-redevelop strategies in a given area when recent investments signal the existence of a capital intensity gap and economic activity mismatch between older buildings and newly built ones. Our analysis shows that investors deem these information externalities valuable. Ceteris paribus, when real estate investments signal obsolescence of the existing stock, investors are willing to pay up to 30% more to acquire a property for redevelopment. Our findings contribute to the literature on the pricing of information signals by peers and provide insights for policymakers to stimulate commercial real estate investments and urban renewal.
Sustainability and Private Equity Real Estate Returns
AbstractThis paper explores private equity real estate fund performance and voluntary environmental, social, and governance (ESG) disclosures. Using data from the National Council of Real Estate Investment Fiduciaries (NCREIF), it examines the relationship between performance for funds in the Open Ended Diversified Core Equity (ODCE) Index and reporting to the Global Real Estate Sustainability Benchmark (GRESB), a platform for disclosure about fund/firm-level ESG strategies. The empirical analyses suggest four conclusions. First, there has been substantial adoption of and reporting to GRESB in the last 5 years, suggesting that reporting to GRESB is a form of table stakes for ODCE members. Second, GRESB participation and performance are both significant predictors of cross-sectional fund returns. Third, GRESB participation and performance are associated with the price appreciation component of fund total returns but not with the income component. Fourth, the relationships between fund returns and GRESB participation and scores are independent of local economic conditions. These results close an important gap in the literature about private equity real estate fund performance and ESG/climate change mitigation efforts in commercial real estate markets.
The Impacts of Climate Risk on Commercial Real Estate: Evidence from REITs
AbstractThough climate risk has been recognized as a material risk in finance and residential real estate, there is limited research on how climate risk affects commercial real estate markets. To enrich such understanding, in this research, we construct a firm-level climate risk measure based on the county-level temperature data from National Oceanic and Atmospheric Administration (NOAA) and an extensive property-level data set of U.S. equity REITs from 1995-2020. The impacts of climate risk on commercial real estate are then examined at the firm-level. We find that REITs with higher climate risk exposures (i.e., with more properties located in counties experiencing higher abnormal temperature changes) tend to have lower cash flow and firm values. The negative impacts from climate risk are robust with various model specifications and control variables. This article contributes towards a better understanding of the economic implications of rising temperatures on commercial real estate and provides empirical support to the temperature-based long-run risk model.
University of St. Gallen
University of Reading
Alexander Phillip Eduard Carlo,
University of Concordia
- R1 - General Regional Economics