Question

real estate investment trust (REIT) competitive interaction

Answer 1

Real Estate Investment Trusts (REITs) In this study we consider the issue of spatial competition among REITs across U.S. states in terms of the degree of interdependencies in financial capital demand. First, we motivate the issue with a theoretical model of cost minimization by a representative REIT in a given U.S. state and demonstrate that a prior it is unclear whether a REIT’s capital demand depends on capital demand of REITs in other states. Then we use spatial econometrics techniques and find empirically that REITs compete for financial capital with REITs in other states. We also find evidence of feedback (or indirect) effects, implying amplified crowding out of financial capital when other REITs in nearby states increase financial capital demand. Our findings are aligned with the Predation Hypothesis, which suggests that REIT managers might exploit neighboring REITs’ and/or investors’ financial distress as an opportunity to steal market share from them. Another key contribution of this study is that we focus on capital liquidity as opposed to stock liquidity.

I investigate about REIT through Internet and find the some important information whether Real Estate Investment Trust (REIT) managers actively manipulate performance measures in spite of the strict regulation under the REIT regime. We provide empirical evidence that is consistent with this hypothesis. Specifically, manipulation strategies may rely on the opportunistic use of leverage. However, manipulation does not appear to be uniform across REIT sectors and seems to become more common as the level of competition in the underlying property sector increases. We employ a set of commonly used traditional performance measures and a recently developed manipulation-proof measure to evaluate the performance of 147 REITs from seven different property sectors over the period 1991–2009. Our findings suggest that the existing REIT regulation may fail to mitigate a substantial agency conflict and that investors can benefit from evaluating return information carefully in order to avoid potentially manipulative funds.

Existing empirical studies indicate that transaction participants, or clienteles, can impact real estate prices. This study extends current research on the impact of transaction participants on asset pricing to one type of institutional real estate investor, REITs, and highlights that clienteles can affect real asset prices. The clientele effect is temporal and is based on clientele expectations and capital sources. REITs have paid acquisition premiums at times, but the REIT form of property ownership and management is not systematically associated with an acquisition premium. This implies that REITs do not have the ability to consistently outbid other investors simply due to their ownership, management, and capital structures. Institutional investors must recognize that changes in the composition of market participants can affect real estate values and investment strategy.

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