Diversification and Cost of Public Debt for REITs: Evidence from the US
No Thumbnail Available
Access rights
openAccess
Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
This publication is imported from Aalto University research portal.
View publication in the Research portal
View/Open full text file from the Research portal
Other link related to publication
View publication in the Research portal
View/Open full text file from the Research portal
Other link related to publication
Author
Date
2024
Department
Major/Subject
Mcode
Degree programme
Language
en
Pages
18
Series
JOURNAL OF REAL ESTATE PORTFOLIO MANAGEMENT, Volume 30, issue 1, pp. 36-53
Abstract
This paper investigates the impact of property type and geographical diversification on the cost of public debt for U.S. real estate investment trusts (REITs). We measure diversification using the negative of the Herfindahl–Hirschman Index (HHI) and represent the debt cost by the yield spread of the debt issue. We find that property-type diversification has a cost-decreasing effect on public debt. For example, our estimations illustrate that a one standard deviation increase in property type diversification decreases the yield spread by 10.97 basis points on average. In contrast, geographical diversification has a cost-increasing effect. For example, we estimate that a one standard deviation increase in regional diversification increases the yield spread by 9.95 basis points on average. Moreover, we find that controlling for the S&P’s credit rating of the debt issue does not entirely absorb the impact of diversification on the yield spread, suggesting a difference in the credit-risk assessment of diversification’s effects between public lenders and credit rating agencies.Description
Keywords
Cost of debt, Credit risk, Diversification, Public debt, REIT, credit risk, public debt, diversification, cost of debt
Other note
Citation
Ibrahim, I & Falkenbach, H 2024, ' Diversification and Cost of Public Debt for REITs: Evidence from the US ', JOURNAL OF REAL ESTATE PORTFOLIO MANAGEMENT, vol. 30, no. 1, pp. 36-53 . https://doi.org/10.1080/10835547.2023.2233348
