Are REIT IPOs Unique? The Global Evidence

Abstract

Previous studies of real estate investment trust (REIT) IPOs have focused primarily on REITs listed in the U.S. These studies in general find that, unlike industrial firm IPOs, REIT IPOs in the U.S. exhibit an abnormally low initial-day return and mixed long-run performance. Our study examines this puzzle using a large sample of 370 REIT IPOs from four continents (14 different countries) during the 1996–2010 period. We find that (1) the newly-established REITs in other countries exhibit similar initial-day return pattern as in the U.S., (2) the low initial-day return might be caused by the fund-like structure of REITs and the re-deployable assets (real estate) they hold, (3) the slightly positive initial-day return is offset by the poor performance in the 190 days subsequent to the IPO, and (4) the change in U.S. REIT IPO performance before and after 1990 is likely due to a change in the REIT structure.