Schnejdar, Sebastian and Heinrich, Michael and Woltering, Rene-Ojas and Sebastian, Steffen (2020) The Discount to NAV of Distressed Open-End Real Estate Funds. JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS, 61 (1). pp. 80-114. ISSN 0895-5638, 1573-045X
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This paper examines the discount to NAV in the context of distressed German open-end real estate funds. This is a unique setting to study NAV discounts because distressed real estate funds are forced to sell off their property portfolios and pay out the proceeds to investors. In contrast, the discount to NAV of closed-end funds or REITs can theoretically persist forever. This enables us to study how investors price the risks associated with the forced liquidation of direct-property portfolios. Our hand-collected dataset covers the complete crisis and post-crisis period from October 2008 through June 2016. Using panel regression methods, we find that the discount to NAV is driven by fundamental risk because it is positively correlated with a fund's leverage ratio and it decreases with the share of liquid assets. We also provide evidence that the discount is related to conflicts of interest between investors and fund management. Besides these fund-specific factors, we find that NAV discounts are driven by spillover effects from the announcement of other funds' liquidations, as well as by investor sentiment, which is proxied by the aggregate level of capital flows into the industry and by the degree of macroeconomic uncertainty.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | COSTLY ARBITRAGE; PERFORMANCE; FLOWS; Open-end real estate funds; Liquidity transformation; Discount to NAV; Liquidity crisis; Uncertainty; Spillover effects |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Immobilienfinanzierung (Prof. Dr. Steffen Sebastian) Business, Economics and Information Systems > Institut für Immobilienenwirtschaft / IRE|BS > Lehrstuhl für Immobilienfinanzierung (Prof. Dr. Steffen Sebastian) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 22 Mar 2021 12:02 |
| Last Modified: | 22 Mar 2021 12:02 |
| URI: | https://pred.uni-regensburg.de/id/eprint/44485 |
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