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Shuffling through the Bargain Bin: Real-Estate Holdings of Public Firms

Author

Listed:
  • Irem Demirci
  • Umit G Gurun
  • Erkan Yönder

Abstract

Constructing a novel database on the real-estate holdings of public firms, we show that distressed firms sell their real-estate assets at a discount relative to healthy firms. We find that distress discount in real-estate assets is less pronounced for sellers with less liquidity-constrained industry peers and in machinery-heavy industries. We also document that asset redeployability and the availability of potential buyers are two important property-specific determinants of the distress discount. Additionally, firms’ property portfolios that are less redeployable with less potential buyers exacerbate the negative impact of financial distress on the cost of borrowing.

Suggested Citation

  • Irem Demirci & Umit G Gurun & Erkan Yönder, 2020. "Shuffling through the Bargain Bin: Real-Estate Holdings of Public Firms," Review of Finance, European Finance Association, vol. 24(3), pages 647-675.
    • Handle: RePEc:oup:revfin:v:24:y:2020:i:3:p:647-675.
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    File URL: http://hdl.handle.net/10.1093/rof/rfz010
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    Citations

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    Cited by:

    1. Wagner, Wolf & Bongaerts, Dion & Mazzola, Francesco, 2021. "Fire Sale Risk and Credit," CEPR Discussion Papers 15798, C.E.P.R. Discussion Papers.
    2. Avis Devine & Isabelle Jolin & Nils Kok & Erkan Yönder, 2024. "How Gender Diversity Shapes Cities: Evidence from Risk Management Decisions in REITs," Journal of Business Ethics, Springer, vol. 189(4), pages 723-741, February.
    3. Piet Eichholtz & Erkan Yönder, 2023. "CEO–CFO team optimism: Commercial real estate transactions and REIT performance," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 103-129, January.

    More about this item

    Keywords

    Collateral discount; Financial distress; Commercial real estate; Redeployability; Loan pricing;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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