Sale and leaseback to market cap rate ratio in emerging markets – an empirical study in Vietnam
Journal of Property Investment & Finance
ISSN: 1463-578X
Article publication date: 2 September 2021
Issue publication date: 9 February 2022
Abstract
Purpose
This study hypothesises that sale and leaseback (SLB) cap rate is lower than the market cap rate in emerging economies, and the difference is due to institutional cost and vacancy risk. This study aims to provide a novel SLB-Cap-Rate Model to assess the performance of SLB transaction (SLBT).
Design/methodology/approach
SLBT data are generally not publicly available in developing countries. This study collected data from 31 SLBTs by conducting semi-structured interviews with stakeholders in Vietnam in 2019. The market cap rates were collected from consultants' reports. The hypotheses are tested by three regression models.
Findings
The results show that the SLBT cap rate is significantly less than the market cap rate in Vietnam, and most of the cap rate discount can be explained by institutional and risk factors. This suggests that SLBT helps to reduce search costs for tenants and vacancy risks. It explains why SLBTs are becoming more common in emerging countries.
Practical implications
The study has a strong practical implication for assessing the performance of SLBT for both buyers and sellers. It introduces a novel model for analysing the cap rates and potential risks of SLBT to facilitate property investment decisions.
Originality/value
This paper is one of the studies that contains new knowledge on SLBs in a developing country specifically Vietnam.
Keywords
Acknowledgements
The authors gratefully acknowledge the financial support provided by the PhD Research Grants 2019 from Business School, the University of Auckland. The authors would also like to thank Dr.Zhi Dong and Dr. Abdul Rasheed-Amidu for the support for Ethics Application. The authors specially thanks two anonymous referees for their comments.
Citation
Truong, Q.L. and Yiu, C.Y. (2022), "Sale and leaseback to market cap rate ratio in emerging markets – an empirical study in Vietnam", Journal of Property Investment & Finance, Vol. 40 No. 2, pp. 220-236. https://doi.org/10.1108/JPIF-03-2021-0019
Publisher
:Emerald Publishing Limited
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