Daniel E Huerta

This paper proposes an experiential pedagogical exercise that allows finance and real estate students to assess the financial viability of a net-leased, single tenant standalone retail property located in a major metropolitan area. This exercise provides students with the opportunity to complement their classroom/textbook instruction with a real-life practical application of the concepts and mathematical skills they have acquired. To complete the case study, students receive an investment prospectus and an assignment protocol that lays out the data and supporting information necessary to value the property and produce an investment thesis. The successful completion of this assignment ensures student competence in valuing commercial real estate using qualitative and quantitative methods which are analytical skills that are readily transferable to the workplace.

This paper investigates the relationship between CEO and top executive ownership and the choice between secured and unsecured debt financing. Although prior research has found that debt structure affects agency costs and firm value, the relationship between executive ownership and debt preferences remains open to debate. We find that an increase in executive ownership results in a higher percentage increase in the use of secured debt, which may be attributed to the managerial effort-enhancing behaviour that results from collateralized debt. Additionally, we find that firms in financial distress tend to rely more heavily on secured debt. Our results contribute to understanding how managerial incentives influence capital structure decisions and the determinants of debt security choices.

This paper examines how executive stock ownership influences the choice of debt structure,
investigating whether institutional owners moderate the relationship between the level of executive ownership and the decision to use public versus private debt. Our findings suggest that firms
with higher levels of executive ownership tend to employ significantly more public debt financing
to potentially reduce the monitoring intensity of their managerial decisions. However, we also
find that oversight by motivated and longer-horizon institutional investors prevents firms from
avoiding the more stringent monitoring associated with privately held debt. Further tests indicate
that the link between CEO and executive ownership levels and the preference for public debt is
more pronounced in smaller firms, which typically experience higher levels of information
asymmetry. Our findings align with the monitoring avoidance hypothesis and the informational
asymmetry hypothesis.

Selecting which geographical markets a REIT serves is an important managerial decision that is expected to significantly impact firm performance. This paper investigates whether holding properties in areas with greater incidence of evictions impacts REIT operational efficiency. Using a comprehensive database of eviction lawsuits in the United States in combination with a time-series of residential REIT portfolio holdings, we construct REIT-year eviction exposure scores to analyse whether more exposure to areas with high aggregate eviction rates is a risk factor affecting REIT efficiency. We posit that market-level tenant default risk captures a locational risk dimension that should be considered in REIT portfolio management. Our results show that REITs with more exposure to markets with high tenant default risk observe higher operational inefficiencies after controlling for relevant firm characteristics and local market factors. These results are robust to multiple model specifications that control for potential endogeneity and omitted variable biases. Our findings have significant implications for REIT managers and investors, suggesting that the choice of property locations should consider aggregate tenant default risk as a determinant factor in residential REIT performance.

Purpose This paper aims to investigate the effect of the COVID-19 pandemic market shock on house pricing, time-on-market (TOM) and probability-of-sale functions using local multiple listing service data from Richmond, Virginia, USA. Design/methodology/approach The empirical analyses use a two-stage residual inclusion model to simultaneously address endogeneity and nonlinearity in modeling sales price and TOM, and a Heckman two-stage procedure to account for sample selection bias in estimating the probability-of-sale. Findings The pandemic shock not only directly impacted average home prices, TOM and probability-of-sale, but it also caused the coefficients of some of the factors that influence these metrics to change while others were stable to the exogenous shock of the pandemic. The authors find that coefficients in the hedonic pricing, TOM and probability-of-sale models did not shift instantaneously; instead, the impact evolved over several months at the beginning of the pandemic until stabilization. Originality/value The results should be of interest to buyers and sellers of residential properties, agents specializing in residential properties and researchers looking to better capture the impact of exogenous events on housing prices and buyer preferences.

•The impact of triple-net leased (NNN) property portfolios on REIT operational efficiency is examined.•REITs holding NNN portfolios are more operationally efficient than their counterparts.•The utilization of NNN leases contributes to REIT operational efficiency which is a channel to higher REIT performance and value.•Employing triple-net leases in REIT portfolios shifts the property operating burden to the tenants, significantly reducing the complexity of operations allowing better control of operating costs. Triple-net leases are legal agreements by which tenants, beyond rent payments, are responsible for operating expenses such as real estate taxes, insurance, and maintenance costs. We examine the relative operational efficiency of Real Estate Investment Trusts (REITs) holding property portfolios consisting of majority triple-net leases. Results suggest REIT holding triple-net leased portfolios are more operationally efficient than their counterparts. Our results suggest that selecting proper lease expense provisions specifying who carries the obligation of operating expenses is a determining factor of REIT operational efficiency.

Conditioned geographical clustering is the strategy of grouping portions of a REIT’s property portfolio within a contiguous region to exploit economies of scale through spatial proximity. This paper examines the impact of conditioned geographical clustering on REIT operational efficiency and value. Our results suggest REITs create value by employing a strategy of property clustering and that operational efficiency is the primary channel through which increases in value are achieved. In addition, results suggest conditioned geographic clustering mitigates the REIT geographical diversification discount. Our findings support an optimal degree of property clustering within the 5th to 35th percentiles of the sample distribution and suggest the optimal cluster size has a radius between 50 and 75 miles.

This paper describes the pedagogical approach of incorporating a Real Estate Investment Trust (REIT) module in an undergraduate finance major capstone course at Florida Gulf Coast University, a regional comprehensive 4-year university. The module consists of two class periods and requires research of publicly-traded REITs using industry accepted sources of data, empirical and qualitative data analysis, and preparation of written and oral presentations that receive academic and practitioner feedback. The assignment aligns with experiential learning theory and the constructivism learning theory found in research in that it incorporates experiencing, reflecting, thinking, and active learning combined with the participation of guest speakers and judges who serve as external validators enhancing the student classroom experience.

This paper examines market and institutional ownership reactions to REIT security issuances. Specifically, we examine the short- and long-term market performance of issuing REITs compared to their non-issuing counterparts. We additionally examine changes in systematic and idiosyncratic risk curtailing from security issuances as well as institutional ownership shifts stemming from the sale of new securities. We find that equity issuances are met with negative market reaction in the event window, while there is no significant immediate market reaction to debt issuances. Buy-and-hold abnormal returns are generally higher for equity issuers in comparison to debt-issuing and non-issuing firms. We also find that equity issuances increase systematic risk exposure while both types of security issuances reduce idiosyncratic risk. Finally, we document that serial issuers of both equity and debt see increases in institutional investment following issuances.

We examine the relationship between institutional ownership and Real Estate Investment Trust (REIT) acquisitions. We find that REITs with relatively higher levels of pre-event institutional ownership are more likely to partake in acquisitions. We additionally find that levels of institutional ownership significantly increase post-acquisitions even after controlling for other relevant factors. This increase is driven by longer-term and passive institutional investors. Further, we find positive influences from the increase in institutional ownership on both market and accounting performance, however, this is driven by increases in short-term and active institutional investor levels. Collectively, our results suggest a significant influence by institutional investment on REIT acquisition decisions that has a significant effect on shareholder wealth.