Rewarding a Long-Term Investment Strategy: REITs

Journal of Real Estate Research

40 Pages Posted: 19 Apr 2021 Last revised: 6 Apr 2022

See all articles by Zifeng Feng

Zifeng Feng

The University of Texas at El Paso

William G. Hardin

Florida International University (FIU) - College of Business Administration

Chongyu Wang

The University of Hong Kong

Date Written: August 26, 2021

Abstract

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

Feng, Zifeng and Hardin, William G. and Wang, Chongyu, Rewarding a Long-Term Investment Strategy: REITs (August 26, 2021). Journal of Real Estate Research, Available at SSRN: https://ssrn.com/abstract=3828769 or http://dx.doi.org/10.2139/ssrn.3828769

Zifeng Feng (Contact Author)

The University of Texas at El Paso ( email )

500 W. University Ave.
El Paso, TX 79968
United States

HOME PAGE: http://https://sites.google.com/view/zifeng-feng/home

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Chongyu Wang

The University of Hong Kong ( email )

Hong Kong
China

HOME PAGE: http://https://sites.google.com/a/uconn.edu/chongyu-michael-wang/home

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