How Big of a Lemons Market is the Secondary Market for Private Equity Real Estate Limited Partnerships?

David Barker (), Kiat Ying Seah () and James D. Shilling ()
Additional contact information
David Barker: University of Iowa
Kiat Ying Seah: National University of Singapore
James D. Shilling: DePaul University

The Journal of Real Estate Finance and Economics, 2019, vol. 59, issue 3, No 3, 418 pages

Abstract: Abstract We find that shares of real estate limited partnerships sell at substantial discounts to net asset values (NAV) and these discounts are influenced by factors associated with agency costs and unrealized gains. Our study builds on previous work by Barber (1996) by examining a much longer time period (1994-2013), including additional control variables, and utilizing Tobit estimation instead of OLS, which we find superior. We find much larger effects of unrealized capital gains than Barber (1996). Factors that reduce fund managers’ freedom to take actions that might reduce shareholder returns such as leverage and high dividend payments reduce discounts.

Keywords: Private equity capital; Secondary markets; Brokerage; Trading prices (search for similar items in EconPapers)
JEL-codes: G12 G24 G3 G31 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11146-018-9681-0

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