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The level of representative underwriting and the underwriting costs of REIT SEOs

The level of representative underwriting and the underwriting costs of REIT SEOs Purpose – The purpose of this paper is to investigate factors influencing the underwriting discount for US Real Estate Investment Trust (REIT) Seasoned Equity Offerings (SEOs). Design/methodology/approach – The study provides new evidence on determinants of underwriting discounts with a comprehensive dataset of 783 US REIT SEOs from 1996 until June 2010. Ordinary least squares regressions are performed to estimate the effect of the level of representative underwriting along with other potential factors on underwriting discounts. Findings – The study complements the well‐documented notion of the economies of scale in SEO underwriting discounts. The equally (value) weighted underwriting discounts averaged 4.21 per cent (4.10 per cent) with a declining trend over time. The findings of this study show the statistically and economically significant negative effect of the level of representative underwriting on the underwriting discounts, as well as the significance of the structure of underwriting syndicate in determining the underwriting discounts. The findings suggest that issuers can minimize the costs of raising secondary equity capital by optimally allocating the underwriting business among the underwriters. Originality/value – This paper adds to the international REIT SEO literature by exploring new evidence behind underwriting discounts. The study includes data before and after the REIT Modernization Act 1999 and during the recent global financial crisis period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

The level of representative underwriting and the underwriting costs of REIT SEOs

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References (56)

Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1463-578X
DOI
10.1108/14635781211194782
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate factors influencing the underwriting discount for US Real Estate Investment Trust (REIT) Seasoned Equity Offerings (SEOs). Design/methodology/approach – The study provides new evidence on determinants of underwriting discounts with a comprehensive dataset of 783 US REIT SEOs from 1996 until June 2010. Ordinary least squares regressions are performed to estimate the effect of the level of representative underwriting along with other potential factors on underwriting discounts. Findings – The study complements the well‐documented notion of the economies of scale in SEO underwriting discounts. The equally (value) weighted underwriting discounts averaged 4.21 per cent (4.10 per cent) with a declining trend over time. The findings of this study show the statistically and economically significant negative effect of the level of representative underwriting on the underwriting discounts, as well as the significance of the structure of underwriting syndicate in determining the underwriting discounts. The findings suggest that issuers can minimize the costs of raising secondary equity capital by optimally allocating the underwriting business among the underwriters. Originality/value – This paper adds to the international REIT SEO literature by exploring new evidence behind underwriting discounts. The study includes data before and after the REIT Modernization Act 1999 and during the recent global financial crisis period.

Journal

Journal of Property Investment & Finance – Emerald Publishing

Published: Feb 3, 2012

Keywords: United States of America; Equity capital; Underwriting; Costs; Real estate; Investments; Seasoned equity offerings; Underwriting syndicate; Level of underwriting; Underwriting discount

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