Rewarding a Long-Term Investment Strategy: REITs
Journal of Real Estate Research
40 Pages Posted: 19 Apr 2021 Last revised: 6 Apr 2022
Date Written: August 26, 2021
The initial structure of real estate investment trusts (REITs) was predicated on real estate as a long-hold asset that would benefit from an ownership structure that fosters property portfolios held and managed for the long term. Using a sample of publicly traded U.S. REITs from 1995 to 2018, we find that REIT performance is positively associated with previous-year property holding period. The results support the original broad policy goals associated with the REIT structure to allow for broad ownership of commercial real estate assets held for the long term. The results further show that REITs adopting long-term investment and management strategies suggested by the enabling laws allowing the REIT structure are more profitable with better shareholder returns. The benefits related to portfolio construction and management shown in this study are complementary to the studies related to property location and other portfolio construction strategies. Our findings are attributed to enhanced operational efficiency, property-level cash flow, and managerial effort.
Keywords: Long-term investing, Buy-and-hold, Performance, Property, REIT, commercial real estate
JEL Classification: G11, J24, R33
Suggested Citation: Suggested Citation