"Agree to Disagree: NAV Dispersion in REITs" (with Stace Sirmans and Stacy Sirmans) Revise and Resubmit, Journal of Real Estate Finance and Economics
Abstract: This is the first study to analyze REIT Net Asset Value analyst coverage and dispersion. We find that NAV analyst coverage has a positive relationship with REIT value and a negative relationship with REIT volatility. Subsequently we analyze NAV analyst estimate dispersion and find that it has a positive relationship with REIT leverage and volatility. We break down our sample by property type and find that retail REITs have the greatest NAV coverage and hospitality REITs have the greatest NAV analyst dispersion. Finally, we compare the significance of NAV forecast dispersion to earnings (FFO) forecast dispersion. We find that NAV dispersion has a significant negative relationship with REIT value whereas FFO dispersion is not found to have a significant relationship.
"Location Choice, Life Cycle and Amenities" (with Hyoung Suk Shim) Forthcoming, Journal of Regional Science
Abstract: Our study proposes a housing location choice model where a household faces a trade off between proximity to their place of employment and proximity to amenities. We use the 2009 national household travel survey (NHTS) to test the predictions. We consider subsamples of high amenity cities and low amenity cities as well as households with and without children. We show that the roles of gender, education, homeownership, household composition and public transportation vary significantly depending on level of amenities. Households with a female head of household, those with a working spouse and with older children prefer locating closer to downtown amenities. Higher educated workers locate closer to work in lower amenity cities. We provide further evidence that female workers locate closer to work, in households with and without children in both high and low amenity cities.
“The Cost of Debt for REITs: The Mortgage Puzzle” (with Linda Allen) Forthcoming, Journal of Real Estate Research
NAREIT Manuscript prize recipient for research on Real Estate Investment Trusts, ARES 2016
Abstract: Established, low-leverage equity REITs with access to the public debt market rely on both non-recourse mortgages and full recourse bonds/notes as sources of long term debt. Interest rates on secured, non-recourse debt (mortgages) include a costly strategic default option premium and do not benefit from a firm’s overall financial capacity. We find that use of non-recourse, mortgage debt is more likely for longer term, smaller borrowings, and during recessionary periods, consistent with REITs valuing financial flexibility in their capital structure. The higher rates for property level debt suggest a benefit to REITs versus single asset investors in terms of cost of capital. Since REITs also access debt at the corporate level, the spread between long-term non-recourse debt and long-term recourse debt implies a benefit to the REIT structure.
"Explaining REIT Returns" (with Stace Sirmans, Stacy Sirmans and Emily Zietz) Forthcoming, Journal of Real Estate Literature
The popularity of REITS as an investment vehicle and the current record breaking performance of the stock market in the U.S. have triggered an increased interest in understanding how REITS perform relative to other investments. Numerous research studies have examined whether REITs behave like stocks and bonds and have worked to identify factors that impact the returns of REITS as an investment option. Many of these studies have examined the asset pricing structure of various assets, including REITs, to identify predictive information useful for investors. This study organizes this literature into five categories and provides summary information on each area. The categories examined are: (1) valuation models and REIT returns, (2) REIT return volatility, (3) REIT returns and asset growth, (4) the impact of financial leverage on REIT returns, and (5) REIT returns and investor sentiment. Results across the literature are aggregated on these critical topical areas into a consistent framework highlighting findings that are useful in explaining the behavior of REIT returns.
"Under the Lender's Looking Glass" (sole authored) Journal of Real Estate Finance and Economics (2017) 55: 435
Abstract: This paper studies the impact of bank monitoring on the risk of US equity REITs. Using a unique, hand-collected data sample of mortgage balances, I show that bank screening and monitoring of REIT assets via utilizing secured mortgage financing (vs unsecured, public debt) lowers the overall company risk of a REIT. At the asset level, screening results in retail and office assets with higher acquisition values and located in primary markets, i.e., more transparent assets, being pledged as collateral. Further, I find evidence consistent with the role of lender monitoring for secured mortgage loans and show that properties located in closer proximity to a REIT’s headquarters are more likely to be pledged as collateral for a mortgage.
"Calendar Anomalies: Do REITs Behave Like Stocks?" (with Su Han Chan and Mehmet Akbulut) International Real Estate Review, 2015 Vol. 18 No. 1: pp. 177 – 215
Abstract: This study addressees the unsettled question of whether REITs behave similarly to stocks with respect to calendar anomalies. We determine the magnitudes of several types of calendar anomalies for both the REIT and stock market index returns in 22 countries between 1990 and 2012. In general, our evidence shows that the calendar effects are not universal across countries and that REITs behave differently from their stock counterparts in a number of countries. The difference in behavior is especially evident around the turn of the month where REITs exhibit significantly higher returns than general stocks in the global sample as well as in 7 of the 22 countries examined. This result may possibly be linked to the higher level of institutional ownership in REITs than in stocks in their corresponding market during the period examined.