EconPapers    
Economics at your fingertips  
 

Rushing to Overpay: Modeling and Measuring the REIT Premium

Serife Akin, Val Lambson, Grant McQueen (), Brennan Platt, Barrett Slade () and Justin Wood ()

The Journal of Real Estate Finance and Economics, 2013, vol. 47, issue 3, 506-537

Abstract: We explore the questions of why Real Estate Investment Trusts (REITs) pay more for real estate than non-REIT buyers and by how much. First, we develop a search model where REITs optimally pay more for property because (1) they are willing, due to cost of capital advantages and, (2) they are occasionally rushed, due to external regulatory time constraints and internal incentives to deploy capital quickly. Second, using commercial real estate transactions, we find that the extant hedonic pricing models contain an unobserved explanatory variables bias leading to inflated estimates of the REIT premium. Third, using a repeat-sales methodology that controls for unobserved property characteristics, we derive more plausible estimates of the REIT premium. Consistent with our model, we also find the REIT-buyer premium depends on the size of the REIT advantage, the rush to deploy, and the relative presence of REITs in the market. Copyright Springer Science+Business Media, LLC 2013

Keywords: Real Estate Investment Trusts (REITs); Equilibrium search; Hedonic price analysis; Repeat-sales analysis; Market efficiency; Deadlines; R33; R32; D83 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11146-012-9372-1 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:47:y:2013:i:3:p:506-537

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-012-9372-1

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2024-06-28
Handle: RePEc:kap:jrefec:v:47:y:2013:i:3:p:506-537