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Concentrate or diversify? The relationship between tenant concentration and REIT performance

Review of quantitative finance and accounting, 2021-10, Vol.57 (3), p.899-927 [Peer Reviewed Journal]

The Author(s) 2021 ;The Author(s) 2021. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 0924-865X ;EISSN: 1573-7179 ;DOI: 10.1007/s11156-021-00965-6

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  • Title:
    Concentrate or diversify? The relationship between tenant concentration and REIT performance
  • Author: Zheng, Chen ; Zhu, Bing
  • Subjects: Accounting/Auditing ; Cash flow ; Concentration ; Corporate Finance ; Econometrics ; Economics and Finance ; Finance ; Liquidity ; Operations Research/Decision Theory ; Original Research ; REITs ; Selection bias
  • Is Part Of: Review of quantitative finance and accounting, 2021-10, Vol.57 (3), p.899-927
  • Description: This paper examines how a concentrated tenant base affects the operating performance and market valuations of US REITs. We observe that REITs adopting a concentrated tenant base present higher corporate cash flows and lower expenses. However, we identify a concentration discount effect that REITs with a more concentrated tenant base experience lower market valuations. We argue that this concentration discount is a result of the trade-offs between the impacts of the tenant base on the operating performance, risk levels and growth potentials. We find that a concentrated tenant base is associated with higher liquidity risk and lower dividend growth, resulting in an inflated discount factor. Our findings are not subject to sub-samples of focused or diversified REITs and stay robust after correcting for the selection bias as well as controlling for the lease structure, tenant quality and anchor tenant effect.r
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 0924-865X
    EISSN: 1573-7179
    DOI: 10.1007/s11156-021-00965-6
  • Source: Springer OA刊
    ProQuest Central
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