On The Direct Costs of REIT SEOs

Document Type

Article

Publication Date

10-1-2013

Department

Finance, Real Estate, and Business Law

Abstract

This study examines the determinants of direct costs for real estate investment trust (REIT) seasoned equity offerings. These costs are not related to information asymmetries, unlike non-REIT firms. Gross spreads vary inversely with stock liquidity, price, and industry activity. Concerning REIT-specific heterogeneity, gross spreads are generally insensitive to property type and operating partnership structure. Still, the findings suggest managers can influence costs as higher fees are directly related to the use of underwriting syndicates and more reputable investment banks. Finally, a test for differences in direct costs across REIT and comparable industrials shows significantly lower direct issuance costs for REITs.

Publication Title

Journal of Real Estate Research

Volume

35

Issue

4

First Page

407

Last Page

443

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