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The level of representative underwriting and the underwriting costs of REIT SEOs

Bairaji, Ranajit Kumar and Dimovski, Bill 2012, The level of representative underwriting and the underwriting costs of REIT SEOs, Journal of property investment & finance, vol. 30, no. 1, pp. 18-41.

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Title The level of representative underwriting and the underwriting costs of REIT SEOs
Author(s) Bairaji, Ranajit Kumar
Dimovski, Bill
Journal name Journal of property investment & finance
Volume number 30
Issue number 1
Start page 18
End page 41
Publisher Emerald Group Publishing Ltd.
Place of publication Bingley, England
Publication date 2012
ISSN 1463-578X
Keyword(s) United States of America
Equity capital
Underwriting
Costs
Real estate
Investments
Seasoned equity offerings
Underwriting syndicate
Level of underwriting
Underwriting discount
Summary Purpose – The purpose of this paper is to investigate factors influencing the underwriting discount for US Real Estate Investment Trust (REIT) Seasoned Equity Offerings (SEOs).

Design/methodology/approach – The study provides new evidence on determinants of underwriting discounts with a comprehensive dataset of 783 US REIT SEOs from 1996 until June 2010. Ordinary least squares regressions are performed to estimate the effect of the level of representative underwriting along with other potential factors on underwriting discounts.

Findings – The study complements the well-documented notion of the economies of scale in SEO underwriting discounts. The equally (value) weighted underwriting discounts averaged 4.21 per cent (4.10 per cent) with a declining trend over time. The findings of this study show the statistically and economically significant negative effect of the level of representative underwriting on the underwriting discounts, as well as the significance of the structure of underwriting syndicate in determining the underwriting discounts. The findings suggest that issuers can minimize the costs of raising secondary equity capital by optimally allocating the underwriting business among the underwriters.

Originality/value – This paper adds to the international REIT SEO literature by exploring new evidence behind underwriting discounts. The study includes data before and after the REIT Modernization Act 1999 and during the recent global financial crisis period.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
Socio Economic Objective 900199 Financial Services not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2012, Emerald Group Publishing Limited
Persistent URL http://hdl.handle.net/10536/DRO/DU:30043093

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