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A-REIT rights issues

Dimovski, Bill 2013, A-REIT rights issues, Journal of property investment and finance, vol. 31, no. 3, pp. 223-236, doi: 10.1108/14635781311322201.

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Title A-REIT rights issues
Author(s) Dimovski, BillORCID iD for Dimovski, Bill
Journal name Journal of property investment and finance
Volume number 31
Issue number 3
Start page 223
End page 236
Total pages 14
Publisher Emerald Group Publishing
Place of publication Bingley, England
Publication date 2013
ISSN 1463-578X
Keyword(s) costs of raising capital
rights issues
equity capital
Summary Purpose – This is the first REIT paper to seek to empirically examine potential influencing factors on the discounts and underwriting fees of Australian REIT rights issues.

Design/methodology/approach – Using a methodology similar to Owen and Suchard, and Armitage, a sample of 62 A-REIT rights issues during 2001-2009 is analyzed. A variety of potential factors influencing discounts and underwriting fees are explored.

Findings – Over A$20 billion was raised by A-REIT rights issues during 2001-2009 (this around three times that raised through A-REIT initial public offerings during the same period). The mean offer price was discounted around 9.5 percent from the current market price and underwriting fees averaged 2.9 percent of gross proceeds raised – both substantially less than for industrial rights issues. The standard deviation of daily returns for the past year appears to influence the percentage discount offered to subscribers. This volatility was particularly noticeable in 2008 and 2009, during the global financial crisis, where new issues were discounted substantially so as to raise equity to repay debt. This historical risk variable appears paramount in determining the discounts to subscribers and fees to underwriters.

Practical implications – A-REITs seeking to minimize the discounts offered to subscribers and to minimize their underwriting costs with rights issue equity capital raisings must first minimize their share price volatility.

Originality/value – This paper adds to the international costs of capital raising literature of REITs by examining such costs with A-REIT rights issues and is the first paper to examine factors influencing these costs.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
DOI 10.1108/14635781311322201
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2013, Emerald Group Publishing Limited
Free to Read? Yes
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Document type: Journal Article
Collections: School of Accounting, Economics and Finance
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