Valuation uncertainty, institutional involvement, and the underpricing of IPOs: The case of REITs

How Does the Market for Corporate Control Function for Property Companies?

“…This is counterintuitive, as it is often argued that the 5-50 rule imposed on REITs limits the creation of large shareholders and thus hinders hostile takeovers (Ghosh and Sirmans 2003). However, our result is in line with Ling and Ryngaert (1997), who state that larger blocks of shares held by outsiders might facilitate takeovers, both because of lower transaction costs and by reducing free-rider problems by small shareholders. Second, we find evidence for REITs that a relatively low number of non-executives on the board increase the takeover likelihood, which is consistent with Weir (1997) and North (2001).…”

Updating expectations: An analysis of post-9/11 returns

“…Besides an increase in vacancy, the anticipated increase in rents did not materialize in part due to the Real Estate Board of New York's (REBNY) written memo to its members that "Any member owner, firm, or broker found to be taking advantage of this terrible tragedy will be expelled from the Real Estate Board." 29 While some critics might argue that expectations might not have been realized because tenants moved out of the New York metro area, Table 7 shows that only a small portion (5.4%) of tenants relocated outside of the metro area. The overwhelming majority of displaced tenants (84.9%) chose to remain in New York City.…”

“…The ensuing sequence of these events (from Lexis-Nexus), reported in Table 8, suggests that none of the REITs under examination experienced information shocks significant enough to bias our statistical analysis, i.e., to contribute to the abnormal returns estimated in Table 4. to reconfigure the space to make it subleasable might not be justified. 29 According to the information reported on the website http://www.propertymag.com/property/Winter02/coverstory_print.html, REBNY urged its members not to take advantage of displaced tenants when negotiating lease rates and suggested using rental rates in place prior to September 11. REBNY also asked brokers to waive their usual commissions and fees in assisting displaced tenants who required short-term (less than 12 months) leases.…”

“…The new REITs featured active management, low leverage, infinite lives and substantial insider holdings (often more than a third of the outstanding shares). These changes led to greater institutional ownership, as documented in Ling and Ryngaert (1997). For the pre-1990 REITs, institutional shareholders usually held less than 10% of the outstanding shares one quarter after the IPO.…”

Financing of Low-Rent Housing REITs in China

“…Researches about the REIT market are mainly concentrated on the price and performance of IPO and the relationship between IPO and SEO [23] . David C. Ling and Michael Ryngaert (1997) found that REIT IPOs in the 1970s and 1980s were initially overpriced and subsequently underperformed other REIT securities in the 100 trading days after initial issuance [44] . In contrast, equity REIT IPOs in the 1990s were underpriced and then moderately outperformed seasoned equity REITs.…”