We examine Initial Public Offerings (IPOs) of Real Estate Investment Trusts (REITs) that went public between 1986 and 2004. Consistent with previous studies, we find that REIT IPOs are associated with lower levels of underpricing relative to traditional issues. We also find that REITs are associated with smaller file price revisions. Both findings are potentially attributable to the lower level of uncertainty associated with pricing REITs. In contrast, using an alternative measure of issuance costs that incorporates the share retention decision by preexisting owners, we find no significant difference between REIT and non-REIT issues, suggesting the results of previous studies are not robust to various specifications of issuance cost and that preexisting owners do not necessarily benefit from the lower level of underpricing. Additionally, we find no difference in the issuance costs of equity versus mortgage REITs, particularly once we control for the use of umbrella partnerships.
Permission to post this publication in our archive was granted by the copyright holder, Springer http://www.springer.com/economics/regional+science/journal/11146 This copy should be used for educational and research purposes only.
The original publication appeared at: Dolvin, Steven and Mark Pyles. “REIT IPOs and the Cost of Going Public” Journal of Real Estate Finance & Economics. v. 39:1, p92-106.
This is the author’s final version, a full published version including charts can be found on the publisher’s website. DOI: 10.1007/s11146-007-9101-3
Available at: http://works.bepress.com/steven_dolvin/13/