REIT Conversions at a global Perspective - Why Do REOCs Adopt the REIT Status?

Dominik Wagner, René-Ojas Woltering, Steffen Sebastian and David Downs

ERES from European Real Estate Society (ERES)

Abstract: Real Estate Investment Trusts (REITs) are well-known institutions since their establishment back in the 1960s at least in the United States. Since the midst of 1990s, the regime spread across the globe. Although their regulatory elaborations differ across countries, the formal requirements remain almost similar.So why is it, REITs became a success story in only some parts of the world? Economic theory postulates several reasons for achieving the tax-exempt status. However, there are practical up- and downsides of course. This paper classifies the severity of regulations, incorporates agency issues and reveals driving forces of listed real estate companies, which influence the decision to opting the REIT status. Thus, balance sheet data as well as legal formalities and specific environments of each corresponding country are incorporated.In academic literature, there are numerous papers tackling REITs in various aspects. Nevertheless, scant is examined about incentives, which affect the decision of stationary firms to convert.Since REITs are quite homogenous and transparent, this entity type is predestinated to serve in a global comparison. Therefore, listed property companies quoted on each domestic market, in which the REIT regime is already established, and listed at the EPRA/NAREIT global real estate index, were observed over the years from 1998 to 2017. To conclude significant influence a panel logistic regression model figures out key characteristics for a higher probability of adopting the REIT status. The overall results suggest a strong causal effect on the capital structure in the subsequent post intervention periods, while elements like size, leverage, discounts of adopting and tax benefits seem to matter most at considering for conversion in the transnational context.

Keywords: Count Data; Logit; Probabilty; REITs (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2019-01-01
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