Buy High, Sell Low: Corporate Investors in the Office Market
Real Estate Economics, Forthcoming
Posted: 22 Feb 2012
Date Written: February 21, 2012
Abstract
Commercial real estate transactions by corporations are matched with transactions of comparable assets by non-institutional investors to evaluate outcomes resulting from corporate investment policy. Corporations invest in long-term assets at a significant premium estimated relative to fundamental values. Divestiture is at a significant discount. Differences in operating performance fail to explain this outcome. Instead, corporate investors value commercial property differently than non-institutional investors. Valuation differences contribute to overpayment during periods of expansion and liquidation during contraction. Corporate sellers also exhibit a high degree of impatience with significantly reduced marketing periods.
Keywords: Corporations, Commercial Real Estate, Valuation, Options, Investment
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