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Paper eres2009_226:
A-REIT Public Debt Offerings: Determinants and Market Reaction

id eres2009_226
authors Chikolwa, Bwembya
year 2009
title A-REIT Public Debt Offerings: Determinants and Market Reaction
source 16th Annual European Real Estate Society Conference in Stockholm, Sweden
summary The paper examines factors that influenced decisions by Australian Real Property Trusts (A-REITs) to issue public debt offerings from 2000-2007 and the equity valuation effects of these offerings. Extant literature shows that on average investors react either weakly negative or not at all to announcements of debt offerings. The framework proposed by Mizan et al. (2009) is used to examine A-REIT decisions to issue bonds and commercial mortgage-backed securities (CMBSs). The standard event-study methodology is used to survey and interpret valuation effects of A-REIT bond and CMBSs offerings. A-REIT bonds are treated as unsecured bonds and CMBSs as secured bonds since CMBSs structured in Australia mainly follow the secured lending mechanism, unlike the true-sale mechanism followed in other parts of the world. It is hypothesised that the strength of the balance sheet will influence the decision by A-REITs to issue either bonds or CMBSs. It is further hypothesised that A-REITs with favourable investment opportunities have a positive response to announcements of their CMBS offerings whereas A-REITs with poor investment opportunities have a negative response to such announcements. The study is of significance in allaying the current perception by investors that public debt offerings by A-REITs are risky investments which has seen credit spreads rise to make their issuance uneconomical. Furthermore, the study highlights the importance of the public debt offerings for the growth of the A-REIT market.
series ERES:conference
discussion No discussions. Post discussion ...
session Investment and Finance
last changed 2009/09/16 16:22
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