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Corporate Real Estate Ownership Implications: International Performance Evidence

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  • Dirk Brounen

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  • Piet Eichholtz
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    Abstract

    In this paper we explore corporate real estate ownership internationally. Based on a sample of 4,636 companies from 18 industries and 9 countries we document distinct patterns and trends in the corporate ownership level of real estate. Real estate ownership appears to be driven by industrial rather than national differences, with corporate real estate ratios ranging between 0.13 for Business Services and 0.63 for the Mining sector. Overall, real estate ownership appears to be decreasing over time, which may be due to the gaining popularity of lease alternatives. When analyzing the stock performance of the companies in our sample, we discover a significantly negative relationship between real estate ownership and a firm’s systematic risk. Idiosyncratic risk bears no significant relationship with real estate ownership. With respect to stock returns our results show that returns are lowest among firms with the highest real estate ownership levels in each industry. After controlling for the variation in risks, the remaining return patterns differ strongly across industries, with a significantly negative relationship between stock outperformance and real estate ownership for Communications and Business Services and a positive but not significant relationship for Transportation. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s11146-005-7015-5
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    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 30 (2005)
    Issue (Month): 4 (June)
    Pages: 429-445

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    Handle: RePEc:kap:jrefec:v:30:y:2005:i:4:p:429-445

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    Web page: http://www.springerlink.com/link.asp?id=102945

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    Keywords: corporate real estate; firm performance; systematic risk;

    References

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    1. Yongheng Deng & Joseph Gyourko, . "Real Estate Ownership by Non-Real Estate Firms: An Estimate of the Impact on Firm Returns," Zell/Lurie Center Working Papers 321, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    2. John L. Glascock & Wallace N. Davidson & C.F. Sirmans, 1989. "An Analysis of the Acquisition and Disposition of Real Estate Assets," Journal of Real Estate Research, American Real Estate Society, vol. 4(3), pages 131-140.
    3. Christopher A. Manning, 1991. "Leasing Versus Purchase of Corporate Real Property: Leases with Residual Equity Interests," Journal of Real Estate Research, American Real Estate Society, vol. 6(1), pages 79-86.
    4. Ronald C. Rutherford, 1990. "Empirical Evidence on Shareholder Value and the Sale-Leaseback of Corporate Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 522-529.
    5. John L. Glascock & Wallace N. Davidson & C. F. Sirmans, 1991. "The Gains from Corporate Selloffs: The Case of Real Estate Assets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(4), pages 567-582.
    6. Peter R. Veale, 1989. "Managing Corporate Real Estate Assets: Current Executive Attitudes and Prospects for an Emergent Management Discipline," Journal of Real Estate Research, American Real Estate Society, vol. 4(3), pages 1-22.
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    Cited by:
    1. Du, Julan & Leung, Charles Ka Yui & Chu, Derek, 2013. "Return enhancing, cash-rich or simply empire-building? An empirical investigation of corporate real estate holdings," MPRA Paper 44253, University Library of Munich, Germany.
    2. Takanori Fukushima & Nobuyuki Isagawa & Tomohiro Mae & Satoru Yamaguchi & Takashi Yamasaki, 2013. "Corporate Real Estate Holdings: Foolfs Gold or Crown Jewel?," Discussion Papers 2013-03, Kobe University, Graduate School of Business Administration.
    3. Diego A. Salzman & Remco C.J. Zwinkels, 2013. "Behavioural Real Estate," Tinbergen Institute Discussion Papers 13-088/IV/DSF58, Tinbergen Institute.
    4. Hongyan Du & Yongkai Ma, 2012. "Corporate Real Estate, Capital Structure and Stock Performance: Evidence from China," International Real Estate Review, Asian Real Estate Society, vol. 15(1), pages 107-126.

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