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Liquidity and Liquidation: Evidence from Real Estate Investment Trusts

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  • David T. Brown

Abstract

This study provides evidence that highly leveraged owner‐managed properties liquidated assets during the commercial real estate decline of the late 1980s, and that this provided buying opportunities for better capitalized buyers. The analysis documents significant financial distress costs for highly leveraged firms during an industry‐wide downturn and shows that these costs are particularly large for owner‐managed firms.

Suggested Citation

  • David T. Brown, 2000. "Liquidity and Liquidation: Evidence from Real Estate Investment Trusts," Journal of Finance, American Finance Association, vol. 55(1), pages 469-485, February.
    • Handle: RePEc:bla:jfinan:v:55:y:2000:i:1:p:469-485
    DOI: 10.1111/0022-1082.00213
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    Cited by:

    1. Ilhyock Shim & Goetz Von Peter, 2007. "Distress Selling and Asset Market Feedback," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 16(5), pages 243-291, December.
    2. Faten Ben Bouheni & Manish Tewari, 2023. "Common risk factors and risk–return trade-off for REITs and treasuries," Journal of Asset Management, Palgrave Macmillan, vol. 24(5), pages 374-395, September.
    3. Huang, Wei & Goodell, John W. & Goyal, Abhinav, 2021. "In times of crisis does ownership matter? Liquidity extraction through dividends during the 2007–2009 financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    4. Yongqiang Chu, 2016. "Asset Fire Sales by Banks: Evidence from Commercial REO Sales," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 5(1), pages 76-101.
    5. S. Price & Jesus Salas & C. Sirmans, 2015. "Governance, Conference Calls and CEO Compensation," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 181-206, February.
    6. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    7. Duran, Hasan Engin & Ferreira-Lopes, Alexandra, 2022. "The Revival Of The Feldstein-Horioka Puzzle And Moderation Of Capital Flows After The Global Financial Crisis (2008/09)," Research in International Business and Finance, Elsevier, vol. 60(C).
    8. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 509-580, Elsevier.
    9. Michael Heinrich & Mark Maurin & Tobias Just & Thomas Schreck, 2016. "Characteristics of German foreclosed residential assets, their real values and discounts. An empirical study," LARES lares-16-heinrich_charact, Latin American Real Estate Society (LARES).
    10. David Downs & Pisun (Tracy) Xu, 2015. "Commercial Real Estate, Distress and Financial Resolution: Portfolio Lending Versus Securitization," The Journal of Real Estate Finance and Economics, Springer, vol. 51(2), pages 254-287, August.
    11. G. Meeks & J. G. Meeks, 2009. "Self‐Fulfilling Prophecies of Failure: The Endogenous Balance Sheets of Distressed Companies," Abacus, Accounting Foundation, University of Sydney, vol. 45(1), pages 22-43, March.
    12. Officer, Micah S., 2007. "The price of corporate liquidity: Acquisition discounts for unlisted targets," Journal of Financial Economics, Elsevier, vol. 83(3), pages 571-598, March.
    13. Kevin C.H. Chiang & Kirill Kozhevnikov & Ming-Long Lee & Craig H. Wisen, 2006. "REIT Mimicking Portfolio Analysis," International Real Estate Review, Global Social Science Institute, vol. 9(1), pages 95-111.

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