An Examination of Primary and Secondary Market Returns in Equity REIT IPOs

Gokkaya, Sinan; Highfield, Michael J.; Roskelley, Kenneth; Steele, Dennis F.

doi:10.2139/ssrn.2127880

Cited by 7 publications

(11 citation statements)

References 9 publications

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“…The results indicate that issues underwritten by underwriters with the best reputation are associated with less initial-day abnormal return in the European markets. The result with respect to aftermarket volatility and underwriter reputation confirms the findings of previous research on the US and European REIT IPO markets (Ling and Ryngaert, 1997; Brounen and Eichholtz, 2002; Gokayya et al , 2015). The result for FIRST_PROPERTY appears to be in support of the suggestion made by Chan et al (2013) for “special” Asian REITs, that excess demand for a new investment product may drive initial-day abnormal return.…”

Section: Resultssupporting

confidence: 88%

“…Compared to previous research, my findings are overall consistent with research on the REIT IPO markets of Belgium, UK (both property and REIT IPOs), Turkey, Malaysia, Singapore, Taiwan and the USA (Brounen and Eichholtz, 2002; Freybote et al , 2008; Kutsuna et al , 2008; Wong et al , 2013; Chan et al , 2013; Gokkaya et al , 2015); however, contradictions exist.…”

Section: Resultssupporting

confidence: 87%

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The global REIT market: initial-day performance of IPOs

Brobert

2016

JERER

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Purpose This paper aims to investigate whether real estate investment trust (REIT) initial public offerings (IPOs) are exposed to abnormal initial-day performance. Previous studies have predominantly focused on REITs listed in the USA and Australia, only a few studies have utilised a multi-country approach and only one study has used a multi-region approach. This paper adds to the literature by, for a global sample, analysing variables proven important in explaining REIT IPO performance but never used in a global sample before by extending the investigation of initial-day return patterns for new REIT types and by offering the first insights from emerging REIT markets. Design/methodology/approach Initial-day raw and abnormal returns were calculated for a sample of 445 IPOs in 26 countries over the period from 1996 to 2014. The returns were partitioned according to a select set of themes and multiple regression analysis was used to isolate the relationship between the explanatory factors and underpricing. Findings For the sample as a whole, the mean initial-day raw return is 3.94 per cent and the mean market-adjusted initial-day return is 4.01 per cent. Even though the initial-day return for a REIT IPO typically is positive, negative mean returns are observed for a few countries and during certain years. Investors should note that for European markets, new property type exhibited a robust positive association with abnormal return, and underwriter reputation exhibited a robust negative relationship with abnormal return. Originality/value This paper fulfils the need to test important concepts on global REIT IPO markets.

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Section: Resultssupporting

confidence: 88%

Section: Resultssupporting

confidence: 87%

The global REIT market: initial-day performance of IPOs

Brobert

2016

JERER

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“…More recent studies on the US REIT IPO market, such as Bairagi and Dimovski (2011) and Gokkaya et al (2015), showed an underpricing level which is in line with previous studies. Bairagi and Dimovski (2011) examine 123 US REIT IPOs during the period 1996-2010, which includes the GFC.…”

Section: Studies About Real Estate Operating Companies and Real Estate Investment Trustssupporting

confidence: 88%

REITs and REOCs and their initial stock market performance: a European perspective

Ascherl

Schaefers

2018

JERER

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Purpose -The purpose of this study is to examine the differences between initial public offering (IPO) pricing in the real estate sector and to provide insight into how real estate investment trust (REIT) and real estate operating company (REOC) IPOs perform in a comparative framework.Design/methodology/approach -The sample consists of 107 European REIT and REOC IPOs from nine European countries over the period 2000-2015. The initial returns are examined by creating subsamples based on the two business forms, countries and specific timeframes (before, during and after the global financial crisis). A multiple regression analysis is applied to identify the ex-ante uncertainty factors, IPO and firm characteristics, which may impact on the different underpricing levels of REITs and REOCs.Findings -European property companies are on average significantly underpriced by 4.63 per cent. The results also reveal that REITs provide a significantly lower underpricing of 2.02 per cent than REOCs, with a positive initial return of 5.69 per cent. The causal treatment effect of the legal form of the company and the underpricing is confirmed by propensity score matching. Among the most influential factors for a lower REIT underpricing, besides the REIT-status itself, are the volatility, offer size and market phase of the IPO. During the global financial crisis (GFC) (2008)(2009)(2010), underpricing exceeds the initial return for the total sample by approximately 70 per cent.Originality/value -This is the first study investigating differences in the underpricing level of REITs and REOCs in a European setting, including the GFC as an extraordinary market phase. The authors provide evidence that REIT IPOs compared to REOC IPOs "leave less money on the table".

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“…In comparison, the average size of REIT IPOs in the United States ranges from $176 million (Ling and Ryngaert ) to $202 million (Gokkaya et al . ). Of the offerings, 15.9% (7.5%) were issued during hot (cold) issue markets, respectively.…”

Section: Resultsmentioning

confidence: 97%

Rationale behind IPO Underpricing: Evidence from Asian REIT IPOs

Ooi

Mori

Wong

2018

Real Estate Economics

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This article examines the rationale behind IPO underpricing using a sample of REIT IPOs in Asia. Although the IPOs registered an average initial return of 3.08%, the issuers were able to sell the IPO shares above their fundamental values by timing the listings in periods when existing REIT stocks are traded at a premium to their net asset values (NAV). An IPO could therefore be underpriced and yet produce a net gain for the issuer. The issuers' net gain from IPO is, however, negatively related to long-run performance of REIT IPOs.

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An Examination of Primary and Secondary Market Returns in Equity REIT IPOs

Cited by 7 publications

References 9 publications

The global REIT market: initial-day performance of IPOs

The global REIT market: initial-day performance of IPOs

REITs and REOCs and their initial stock market performance: a European perspective

Rationale behind IPO Underpricing: Evidence from Asian REIT IPOs

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