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"Text contains both numerical examples and excerpts from contracts, in order to provide useful explanations followed by immediate practical cases"--

Purpose
The purpose of this paper is to identify the capital structure determinants through an analysis of 74 All-Equity REITs listed in the US market from 2005 to 2014. Furthermore, the paper aims at understanding the impact of the financial economic crisis (FEC) among the identified explanatory variables.


Design/methodology/approach
A fixed effect panel regression model is performed based on Trade-off Theory (TOT) and Pecking Order Theory as a starting point to provide expectations on the relationships incurring among the identified variables.


Findings
First, while tangibility of assets and crisis evidenced a positive relationship with REITs' financial leverage, operating risk and growth opportunities variables displayed a negative relationship. Meanwhile, size and profitability did not appear to influence the capital structure. Second, it appears that the positive effects of tangibility of assets and profitability variables on US REITs' capital structure increased as a consequence of the FEC. Operating risk and growth opportunities variables slightly increased their negative relationship with US REITs' capital structure after the FEC. The TOT prevails when explaining the economic reality underlying US REITs.


Practical implications
The paper contributes to the understanding of US REITs' financing decisions within the US market. The FEC also had a substantial indirect impact on the financial leverage determinants of US REITs, the latter being nowadays more oriented to maintaining a flexible capital structure.


Originality/value
The paper provides a comprehensive view of the medium-term effect of the FEC on US REITs' capital structure.

PurposeListed real estate securities have historically been used to achieve an exposure to the real estate asset class and to obtain a broad spectrum of other specific features such as return enhancement, but whether they must be associated to the direct property or to the broad stock market is deceptive on a merely theoretical basis. Moreover, the global financial crisis (GFC) has questioned their risk/return characteristics. The purpose of this paper is to asses if listed real estate securities are still enough dissimilar from the broad stock market to provide remarkable diversification benefits for a long term investor.Design/methodology/approachThe analysis has been developed on the FTSE EPRA/NAREIT Developed Index and at country level (USA, UK, France, Japan, Singapore, Hong Kong and Australia) from November 2001 to October 2013. The authors analysed the real estate index over a broad market index and adjusted for a possible bias related to heteroskedasticity and autocorrelation, using a least squared regression with Newey-West HAC Correction. A Recursive Least Squares (RLS) was also used to test the stability of the parameters with the CUSUM squared test and the Chow test. Finally the authors tested for cointegration with the Augmented Dickey Fuller and the Engle Granger tests.FindingsThe authors found that after the GFC the Beta-risk related to the stock market has witnessed a sharp increase, but with differences among country. While the USA, the UK and France have experienced a trend similar to the one described for the FTSE EPRA/NAREIT Developed Index, Asian Markets depict a quite stable Beta over the full sample (gradual increase for the Australian market). Evidence of a structural break in conjunction with 2008 crisis has been found only in USA, UK and France.Practical implicationsListed real estate securities, even if characterised by time varying Beta-risk and partially reduced diversification benefits, are still worth to be included in long term horizon portfolios. However, more wary considerations should be drafted before investing in the Asian markets where evidence of cointegration was found only for the Japanese market.Originality/valueAnalysis of post GFC effect on direct property investment vs indirect listed investment worldwide.

Purpose– The purpose of this paper is to analyse the NAV discount of European REITs listed in France, the Netherlands and the UK between 2003 and 2014, considering elements of both "rational" and "noise trader" approaches.Design/methodology/approach– The analysis examines the hypothesis that discounts (premiums) are the result of leverage, size, liquidity, risk, performance, investment activity and sentiment. The regressions are initially run against the traditional NAV discount, subsequently using the unlevered NAV discount measure introduced by Morriet al.(2005) in order to clean out the bias generated by the level of leverage. The NAV discount is then adjusted for investor sentiment (appraisal reduction) with the aim of better identifying firm-specific factors, considering distortions induced by sentiment.Findings– Higher liquidity commands lower discounts for French REITs, while Dutch and British REITs, which trade in markets characterized by a higher number of average daily transactions, do not seem to feature discounts resulting from liquidity. For all three samples, operational risk and performance are significant in explaining the NAV discount, the former having a positive relationship with the discount, and the latter a negative one. When measured using the average sector discount, sentiment has a profound effect on the discount, accounting alone for 10-15 per cent of the explanatory power of the model.Practical implications– REITs listed in different markets behave differently. When the discount is adjusted in order to remove the bias resulting from the level of debt, the relationship between leverage and the unlevered discount becomes less pronounced in all cases.Originality/value– The paper considers a new approach to NAV discount puzzle that takes into account market sentiment and appraisals.

Purpose
– The purpose of this paper is to analyse the performance of UK property funds using the dual sources of active management, Active Share and tracking error, to distinguish between the types of active management styles used by funds.


Design/methodology/approach
– The authors use data on 38 UK real estate funds and classify them into five active management categories using the dual sources of active management, Active Share and tracking error. Then, the authors compare their return performance against Active Share, tracking error, fund size and leverage. Therefore the paper is able to answer two of the fundamental questions of investment: does active management add value and what form of active management, stock selection or factor risk, is better at adding value to the fund?


Findings
– There are three main conclusions. First, the approach of Cremers and Petajisto (2009) and Petajisto (2010) is able to classify real estate funds in the UK on their management activity into categories that makes intuitive sense and seem stable over time. Second, balanced funds show relatively low Active Shares and particularly low tracking errors, due to the benefits of property-type diversification. In contrast, specialists funds display higher Active Shares and both low and high tracking errors depending on their stock-picking approach; diversified or concentrated. Third, an analysis over different time periods confirmed that funds in the sample essentially remained in the same categories within the sample period, even during markedly different market return periods. This implies that investors need to constantly monitor changes in the market and switch between fund management styles, if at all possible.


Research limitations/implications
– The analysis was only based on 38 funds with complete data over the sample period and the relationship between fees and active management was not examined, even though ultimately investors are concerned with returns after management fee. It would be instructive therefore if the number of funds and time period was expanded to see if the results are robust and to see whether management fees outweigh the benefits of active manager.


Practical implications
– The findings should enable investors to make a more informed investment decisions in the future.


Originality/value
– To the best of the author's knowledge this is the first paper to apply the dual sources of active management, Active Share and tracking error, in the UK real estate market.

PurposeThis paper aims to investigate the determinants affecting the choice of the capital structure of European property companies.Design/methodology/approachThe analysis considers the set of companies belonging to the EPRA/NAREIT Europe Index (both REITs and non‐REITs) and is based on panel data to get greater reliability and to check the cross‐time path of explanatory variables. Seven independent variables (size, profitability, growth opportunities, cost of debt, ownership structure, risk, and category) are studied over a five‐year period.FindingsResults clearly show that non‐REIT companies are significantly more leveraged than REITs, confirming the importance of the tax‐exempt status in affecting capital structure choices. The negative relationship between operating risk and leverage demonstrates that the managers of riskier firms tend to reduce the overall company's uncertainty by adopting a more careful capital structure. Moreover, more profitable firms have less recourse to leverage. Evidence also suggests that the company's asset size is able to directly influence the amount of debt issued, confirming the hypothesis that debt is cheaper for bigger firms and its issue is affected by economies of scale.Originality/valueThe paper represents a break point with past literature for the sample, based on European companies, and the methodology, that relies more on market rather than on balance‐sheet or income statement items (obtaining higher comparability and avoiding country‐specific bias mainly concerning law, fiscal and earning management issues).

"Text contains both numerical examples and excerpts from contracts, in order to provide useful explanations followed by immediate practical cases"--

PurposeThe aim of this research paper is to analyze the connection between ESG performance and financial performance within the real estate sector. By focusing on ESG ratings and pillar scores as proxies for ESG performance, the study investigates how these factors impact both profitability and market indicators.Design/methodology/approachWith data sourced from over 680 publicly listed real estate companies, the research employs a fixed effects regression model to analyze the findings. By utilizing this method, the study can assess the impact of governance, environmental and social factors on both the accounting and market performance of real estate companies.FindingsThe outcomes of this study underscore a link between sustainability, particularly environmental aspects and financial performance. However, the study also reveals a contrasting result: governance factors are associated with adverse financial outcomes. Nevertheless, it is important to highlight the limitations as the results present a mixed picture with limited significant findings.Practical implicationsCompanies should prioritize improvements in environment to boost profitability, while they should carefully consider the costs and benefits associated with enhancing their governance structure.Originality/valueBy focusing on this industry and adopting a global perspective, the study addresses a gap in the literature. The research's innovative approach to utilizing ESG ratings and pillar scores as proxies for ESG performance enhances its originality. Furthermore, the research's identification of the differing impacts of environmental and governance factors on financial outcomes add novel perspectives to the discourse.

PurposeCorporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can prevent issues and corporate scandals as the company ensures greater transparency and accountability. Accordingly, this paper aims to investigate the relationship between shareholder-oriented corporate governance mechanisms, value and performances in the real estate sector.Design/methodology/approachThis paper investigates the relationship between corporate governance mechanisms, performance and value in a sample of 111 USA real estate firms. After collecting data from 2014 to 2018, this paper tests the research hypothesis using the linear fixed-effect model.FindingsThe results demonstrate a positive impact of shareholder-oriented corporate governance mechanisms on performance and value. In particular, firms with no chief executive officer (CEO) duality and staggered board mechanisms and recognizing excess variable compensation to the firms' executive have a significantly higher Tobin's Q, return on assets (ROA) and price-to-book performance.Practical implicationsThe implications are twofold: on the one hand, this motivates shareholders to establish new corporate control mechanisms to maximize value, attract more capital and improve operating performance. On the other hand, this allows investors to direct the investors' resources toward real estate firms with effective corporate governance mechanisms that may return higher performance and value.Originality/valueFocusing on the real estate industry, where governance is expected to have a lower impact due to solid regulation, especially in real estate investment trusts (REITs), the research allows the formulation of industry-specific inferences that may be generalized for the general market.

PurposeThe purpose of this study is to analyze the determinants that lead REITs to pay out more dividends than the required level to retain their tax-favored status. In particular, the focus is on the effect that information asymmetry has on REITs' excess dividends distribution.Design/methodology/approachA sample of 341 REITs from the USA, France, the UK, Spain, Belgium, Germany, the Netherlands and Italy has been analyzed for the period 2000–2016. Employing multiple linear regression models, the effects of information asymmetry, cash flow, size, ROA, leverage and treasury shares on excess dividends have been explored.FindingsResults indicate that REITs with greater information asymmetry distribute significantly more excess dividends, with superior evidence in Europe than in the USA. Regarding other determinants, cash flow influences excess dividends the most, whereas ROA and common shares repurchase have an inverse relationship with excess dividends.Practical implicationsThe paper explores the effects of excess dividends distribution on the most relevant REITs features. The joint analysis of the European and the US samples allows this study to make a comparison between the two markets and to identify affinities and differences.Originality/valueThe paper tests whether a proxy of asymmetry information plays a role in affecting the excess dividends distribution. In contrast to previous researches, it expands the analysis by comparing the US and European markets to underline any difference in the effect of asymmetry information on excess dividends. The topic has never been investigated before in relation to the European market.