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Article
Publication date: 4 September 2017

Giacomo Morri and Edoardo Parri

The purpose of this paper is to identify the capital structure determinants through an analysis of 74 All-Equity REITs listed in the US market from 2005 to 2014. Furthermore, the…

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Abstract

Purpose

The purpose of this paper is to identify the capital structure determinants through an analysis of 74 All-Equity REITs listed in the US market from 2005 to 2014. Furthermore, the paper aims at understanding the impact of the financial economic crisis (FEC) among the identified explanatory variables.

Design/methodology/approach

A fixed effect panel regression model is performed based on Trade-off Theory (TOT) and Pecking Order Theory as a starting point to provide expectations on the relationships incurring among the identified variables.

Findings

First, while tangibility of assets and crisis evidenced a positive relationship with REITs’ financial leverage, operating risk and growth opportunities variables displayed a negative relationship. Meanwhile, size and profitability did not appear to influence the capital structure. Second, it appears that the positive effects of tangibility of assets and profitability variables on US REITs’ capital structure increased as a consequence of the FEC. Operating risk and growth opportunities variables slightly increased their negative relationship with US REITs’ capital structure after the FEC. The TOT prevails when explaining the economic reality underlying US REITs.

Practical implications

The paper contributes to the understanding of US REITs’ financing decisions within the US market. The FEC also had a substantial indirect impact on the financial leverage determinants of US REITs, the latter being nowadays more oriented to maintaining a flexible capital structure.

Originality/value

The paper provides a comprehensive view of the medium-term effect of the FEC on US REITs’ capital structure.

Details

Journal of Property Investment & Finance, vol. 35 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Open Access
Article
Publication date: 9 July 2024

Giacomo Morri, Anna Dipierri and Federico Colantoni

This paper aims to explore the dynamic relationship between ESG scores and REITS returns. The overarching goal is to provide a better understanding of how ESG considerations…

Abstract

Purpose

This paper aims to explore the dynamic relationship between ESG scores and REITS returns. The overarching goal is to provide a better understanding of how ESG considerations impact financial performance across different temporal contexts.

Design/methodology/approach

Using a sample of 175 European Equity REITs, this analysis combines numerical ESG scores with the Fama-French model, employing both random and fixed effects methods. It integrates individual REIT data and the HESGL (High ESG Scores Minus Low ESG Scores) factors to assess their impact on REIT returns.

Findings

The findings highlight divergent patterns between the numerical ESG score and the HESGL factor concerning REIT returns. While the numerical ESG score displays a negative impact in later periods, the HESGL factor demonstrates a positive effect during prosperous times but loses significance during crises.

Originality/value

This research contributes original insights by emphasizing the importance of temporal segmentation in understanding the nuanced and evolving nature of the relationship between ESG scores and REITs’ returns. The study provides a comprehensive analysis and highlights divergent outcomes that are essential for a better interpretation of ESG impacts on real estate investments.

Details

Journal of European Real Estate Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 30 October 2018

Giacomo Morri and Karoline Jostov

This paper aims to investigate the impact of leverage on the total shareholder return of European publicly traded real estate vehicles in three periods: Crisis Period (2007-2009)…

Abstract

Purpose

This paper aims to investigate the impact of leverage on the total shareholder return of European publicly traded real estate vehicles in three periods: Crisis Period (2007-2009), Rebound Period (2009-2014) and the Whole Period.

Design/methodology/approach

Cross-sectional analysis is used and the leverage effect on the performance is controlled for seven other independent variables (local market risk premium, size, book-to-market, short-term debt, cash); moreover, regional differences are accounted for.

Findings

It is established that during the Crisis Period, leverage levels are negatively associated with performance: this relationship also holds throughout the Whole Period, implying that for real estate securities, the cost of financial distress is larger than the potential gain from taxation, although the economic significance of it is limited. The Fama and French (1992) three factors, including size, book-to-market and local market risk premium, are found to be relevant, which is consistent with the literature. In addition, the UK and Sweden regions are identified as significant.

Originality/value

Even if there is sizeable body of literature on determinants of leverage and determinants of asset returns, little work has been done on how leverage affects the returns of European real estate companies. In addition, this paper takes advantage of observations from a full economic cycle and the possible effects of the crisis period.

Details

Journal of European Real Estate Research, vol. 11 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 19 March 2024

Giacomo Morri, Fan Yang and Federico Colantoni

The aim of this research paper is to analyze the connection between ESG performance and financial performance within the real estate sector. By focusing on ESG ratings and pillar…

Abstract

Purpose

The aim of this research paper is to analyze the connection between ESG performance and financial performance within the real estate sector. By focusing on ESG ratings and pillar scores as proxies for ESG performance, the study investigates how these factors impact both profitability and market indicators.

Design/methodology/approach

With data sourced from over 680 publicly listed real estate companies, the research employs a fixed effects regression model to analyze the findings. By utilizing this method, the study can assess the impact of governance, environmental and social factors on both the accounting and market performance of real estate companies.

Findings

The outcomes of this study underscore a link between sustainability, particularly environmental aspects and financial performance. However, the study also reveals a contrasting result: governance factors are associated with adverse financial outcomes. Nevertheless, it is important to highlight the limitations as the results present a mixed picture with limited significant findings.

Practical implications

Companies should prioritize improvements in environment to boost profitability, while they should carefully consider the costs and benefits associated with enhancing their governance structure.

Originality/value

By focusing on this industry and adopting a global perspective, the study addresses a gap in the literature. The research’s innovative approach to utilizing ESG ratings and pillar scores as proxies for ESG performance enhances its originality. Furthermore, the research’s identification of the differing impacts of environmental and governance factors on financial outcomes add novel perspectives to the discourse.

Details

Journal of Property Investment & Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-578X

Keywords

Open Access
Article
Publication date: 27 March 2023

Giacomo Morri, Rachele Anconetani and Luciano Pistritto

Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can…

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Abstract

Purpose

Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can prevent issues and corporate scandals as the company ensures greater transparency and accountability. Accordingly, this paper aims to investigate the relationship between shareholder-oriented corporate governance mechanisms, value and performances in the real estate sector.

Design/methodology/approach

This paper investigates the relationship between corporate governance mechanisms, performance and value in a sample of 111 USA real estate firms. After collecting data from 2014 to 2018, this paper tests the research hypothesis using the linear fixed-effect model.

Findings

The results demonstrate a positive impact of shareholder-oriented corporate governance mechanisms on performance and value. In particular, firms with no chief executive officer (CEO) duality and staggered board mechanisms and recognizing excess variable compensation to the firms' executive have a significantly higher Tobin's Q, return on assets (ROA) and price-to-book performance.

Practical implications

The implications are twofold: on the one hand, this motivates shareholders to establish new corporate control mechanisms to maximize value, attract more capital and improve operating performance. On the other hand, this allows investors to direct the investors' resources toward real estate firms with effective corporate governance mechanisms that may return higher performance and value.

Originality/value

Focusing on the real estate industry, where governance is expected to have a lower impact due to solid regulation, especially in real estate investment trusts (REITs), the research allows the formulation of industry-specific inferences that may be generalized for the general market.

Details

Journal of Property Investment & Finance, vol. 41 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 11 September 2017

Giacomo Morri, Dejan Djukic and Federico Chiavazza

The purpose of this paper is to analyse the effect of real estate weight on Italian manufacturing companies and the effect of occupancy costs on income. The main purpose is to…

Abstract

Purpose

The purpose of this paper is to analyse the effect of real estate weight on Italian manufacturing companies and the effect of occupancy costs on income. The main purpose is to understand whether the ownership of properties, for non-real-estate companies, has an impact on performance.

Design/methodology/approach

The empirical research was carried out for a 10-year period (2004-2013) with a sample of 300 manufacturing companies belonging to six sub-sectors of the manufacturing sector. In the second part, a cluster analysis was conducted to identify better and more poorly performing companies. Companies were classified in different clusters according to their ROA, debt ratio and liquidity ratio. The analysis from the first part was repeated to verify the differences between the clusters with respect to their real estate holdings.

Findings

First, the authors found that manufacturing sub-sectors do not differ in terms of real estate holdings. They found that real estate holdings affect performance: companies with lower real estate asset weight and higher occupancy costs perform better.

Research limitations/implications

The main contribution of the paper is the finding that most Italian manufacturing companies do not take into account corporate real estate (CRE) decisions and the trade-off between ownership and leasing, thus showing that they are ineffective at CRE management.

Practical implications

It could be wise to pay more attention to the existing trade-off between the occupancy costs and the holdings of real estate as ownership, as a significant negative correlation between the two indicators was found for the best performing companies. However, the level of this correlation was still rather small. Moreover, to increase performance, companies should be able to recognise that maintaining constant investments in CRE is a better solution than increasing these investments and locking more capital into illiquid assets (which have lower returns than the core business), especially during periods of turmoil and financial crisis.

Originality/value

For the first time, the Italian manufacturing sector has been widely investigated.

Details

Journal of Corporate Real Estate, vol. 19 no. 3
Type: Research Article
ISSN: 1463-001X

Keywords

Article
Publication date: 30 December 2020

Giacomo Morri, Federico Palmieri and Emiliano Sironi

The purpose of this study is to analyze the determinants that lead REITs to pay out more dividends than the required level to retain their tax-favored status. In particular, the…

Abstract

Purpose

The purpose of this study is to analyze the determinants that lead REITs to pay out more dividends than the required level to retain their tax-favored status. In particular, the focus is on the effect that information asymmetry has on REITs’ excess dividends distribution.

Design/methodology/approach

A sample of 341 REITs from the USA, France, the UK, Spain, Belgium, Germany, the Netherlands and Italy has been analyzed for the period 2000–2016. Employing multiple linear regression models, the effects of information asymmetry, cash flow, size, ROA, leverage and treasury shares on excess dividends have been explored.

Findings

Results indicate that REITs with greater information asymmetry distribute significantly more excess dividends, with superior evidence in Europe than in the USA. Regarding other determinants, cash flow influences excess dividends the most, whereas ROA and common shares repurchase have an inverse relationship with excess dividends.

Practical implications

The paper explores the effects of excess dividends distribution on the most relevant REITs features. The joint analysis of the European and the US samples allows this study to make a comparison between the two markets and to identify affinities and differences.

Originality/value

The paper tests whether a proxy of asymmetry information plays a role in affecting the excess dividends distribution. In contrast to previous researches, it expands the analysis by comparing the US and European markets to underline any difference in the effect of asymmetry information on excess dividends. The topic has never been investigated before in relation to the European market.

Details

Journal of Property Investment & Finance, vol. 39 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 5 May 2021

Giacomo Morri, Ugo Perini and Rachele Anconetani

The paper aims to investigate the performance determinants of European non-listed private equity real estate funds between 2001 and 2014.

Abstract

Purpose

The paper aims to investigate the performance determinants of European non-listed private equity real estate funds between 2001 and 2014.

Design/methodology/approach

Using a sample of 363 funds collected from the Inrev database, the analysis evaluated the impact of fees and other intrinsic characteristics of these funds, such as leverage, size and duration, on the funds’ performance, intending to enhance the understanding underlying their relationship.

Findings

The findings show a negative relationship between the return of the funds and redemption fee, performance fee and management fee. Conversely, marketing fees have a positive effect on performance. When analyzing the investment style, the results reveal inhomogeneous behaviors of leverage on funds’ performance. This variable has a positive impact on the return in core funds, while there is a negative relationship in value-added investments. Finally, the emphasis on the global financial crisis shows that the effects of the independent variables on the performance do not significantly change in different economic cycles.

Practical implications

The practical implication of the research is to understand whether an investor can direct its resources in a fund, leveraging on certain intrinsic characteristics that can be observed a priori.

Originality/value

Even if there is a considerable body of literature on determinants of performance in European non-listed real estate funds, little research has analyzed the role of fees in driving their results. Besides, this paper takes advantage of observations from different investment styles to emphasize the impact of higher or lower risk profiles and from the full economic cycle to understand the effects of the crisis period.

Details

Journal of European Real Estate Research , vol. 14 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 6 March 2017

Giacomo Morri and Federico Romito

Listed real estate securities have historically been used to achieve an exposure to the real estate asset class and to obtain a broad spectrum of other specific features such as…

Abstract

Purpose

Listed real estate securities have historically been used to achieve an exposure to the real estate asset class and to obtain a broad spectrum of other specific features such as return enhancement, but whether they must be associated to the direct property or to the broad stock market is deceptive on a merely theoretical basis. Moreover, the global financial crisis (GFC) has questioned their risk/return characteristics. The purpose of this paper is to asses if listed real estate securities are still enough dissimilar from the broad stock market to provide remarkable diversification benefits for a long term investor.

Design/methodology/approach

The analysis has been developed on the FTSE EPRA/NAREIT Developed Index and at country level (USA, UK, France, Japan, Singapore, Hong Kong and Australia) from November 2001 to October 2013. The authors analysed the real estate index over a broad market index and adjusted for a possible bias related to heteroskedasticity and autocorrelation, using a least squared regression with Newey-West HAC Correction. A Recursive Least Squares (RLS) was also used to test the stability of the parameters with the CUSUM squared test and the Chow test. Finally the authors tested for cointegration with the Augmented Dickey Fuller and the Engle Granger tests.

Findings

The authors found that after the GFC the Beta-risk related to the stock market has witnessed a sharp increase, but with differences among country. While the USA, the UK and France have experienced a trend similar to the one described for the FTSE EPRA/NAREIT Developed Index, Asian Markets depict a quite stable Beta over the full sample (gradual increase for the Australian market). Evidence of a structural break in conjunction with 2008 crisis has been found only in USA, UK and France.

Practical implications

Listed real estate securities, even if characterised by time varying Beta-risk and partially reduced diversification benefits, are still worth to be included in long term horizon portfolios. However, more wary considerations should be drafted before investing in the Asian markets where evidence of cointegration was found only for the Japanese market.

Originality/value

Analysis of post GFC effect on direct property investment vs indirect listed investment worldwide.

Details

Journal of Property Investment & Finance, vol. 35 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 December 2020

Giacomo Morri, Rachele Anconetani and Luca Benfari

The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs).

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Abstract

Purpose

The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs).

Design/methodology/approach

Using a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance.

Findings

The results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables.

Originality/value

The commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market.

Details

Journal of European Real Estate Research , vol. 14 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

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