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Paper eres2017_329:
Public vs. Private Market Arbitrage – Can Growth REITs Benefit from their High Valuation?

id eres2017_329
authors Downs, David H.; Steffen Sebastian, René-Ojas Woltering
year 2017
title Public vs. Private Market Arbitrage – Can Growth REITs Benefit from their High Valuation?
source 24th Annual European Real Estate Society Conference in Delft, Netherlands
summary This paper examines the impact of the ratio of price-to-fundamental value on the stock market performance of real estate securities following seasoned equity offerings and senior debt issuances. Using a global sample of real estate securities, we distinguish between growth stocks, i.e. those with the highest stock prices relative to the private market value of their properties, and value stocks, which tend to trade at substantial discounts to their net asset value (NAV). Consistent with the notion that newly issued equity is ultimately priced similar to pre-SEO levels, we find that growth stocks perform significantly better than value stocks in the 36 months following the SOE. We also examine the long run performance following senior debt issuances and document a substantial outperformance (underperformance) for growth (value) real estate securities in the 36 months following the offering. Overall, our findings are consistent with the hypothesis that growth REITs can benefit from “public vs. private market arbitrage”.
keywords public vs. private market arbitrage; net asset value; value vs. growth; debt offerings; seasoned equity offerings%2C
series ERES:conference
type paper session
discussion No discussions. Post discussion ...
ratings
session Performance & Risk Management
last changed 2017/11/18 16:20
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