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Why Do Real Estate Master Limited Partnerships Seem to be Undervalued?

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Abstract

This study investigates one reason why real estate master limited partnerships (MLPs) are undervalued. The study finds that parents of MLPs, generally, and parents of non-real estate MLPs experience positive stock price increases when creating MLPs in the same business as the parent firm and insignificant price increases otherwise. Parents of real estate MLPs experience insignificant stock price changes whether or not the MLP is in the same business as the parent firm. However, despite insignificance, we find evidence that real estate parents forming real estate MLPs may experience greater stock price appreciation than non-real estate parents creating real estate MLPs.

Suggested Citation

  • Donald G. Christensen & Donald R. Levi, 1993. "Why Do Real Estate Master Limited Partnerships Seem to be Undervalued?," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 1-12.
  • Handle: RePEc:jre:issued:v:8:n:1:1993:p:1-12
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    References listed on IDEAS

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    1. Gailen L. Hite & James E. Owers & Ronald C. Rogers, 1984. "The Separation of Real Estate Operations By Spin-Off," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 318-332.
    2. Moore, William T. & Christensen, Donald G. & Roenfeldt, Rodney L., 1989. "Equity valuation effects of forming master limited partnerships," Journal of Financial Economics, Elsevier, vol. 24(1), pages 107-124, September.
    3. Corrado, Charles J., 1989. "A nonparametric test for abnormal security-price performance in event studies," Journal of Financial Economics, Elsevier, vol. 23(2), pages 385-395, August.
    4. Sicherman, Neil W & Pettway, Richard H, 1987. " Acquisition of Divested Assets and Shareholders' Wealth," Journal of Finance, American Finance Association, vol. 42(5), pages 1261-1273, December.
    5. Ronald C. Rutherford & Hugh O. Nourse, 1988. "The Impact of Corporate Real Estate Unit Formation on the Parent Firm's Value," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 73-84.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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