Abstract
This study examines the determinants of direct costs for REIT seasoned equity offerings. REIT direct costs are unrelated to information asymmetries, unlike for non-REITs. Gross spreads vary inversely with stock liquidity, price, and industry activity. Concerning REIT-specific heterogeneity, gross spreads are generally invariant to property type and operating partnership structure. Still, the findings suggest managers can exert some influence on costs as higher fees associate directly with the use of underwriting syndicates and more reputable investment banks. As a final component of our analysis we test for differences in direct costs across REIT and comparable industrials and observe significantly lower direct issuance costs for REITs.
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