Corporate real estate's impact on the takeover market

This article explores the issues and problems associated with corporate real estate ownership as viewed through the takeover market. The perception held by managers is that corporate real estate assets are unique, specialized assets. This perception conflicts with financial theory which states that the market values all corporate assets based only on their expected future cash flows. Thus corporate real estate assets are priced according to their cash flows and are like other corporate assets. This study tests the hypothesis that corporate real estate is a specialized asset by examining the impact real estate assets have on the takeover market. The study uses a logit regression model in order to attempt to predict which firms become takeover targets. If corporate real estate in general is a specialized asset, then real estate is expected to be an important variable in predicting takeover targets. Although the logit model has little predictive accuracy, results from the prediction model suggest that corporate real estate plays a significant part in determining the likelihood of a firm's becoming a takeover target. The greater the real estate holdings, the greater the likelihood of a firm's becoming a takeover target.     

Comovement After Joining an Index: Spillovers of Nonfundamental Effects

This study considers the case of two overlapping categories in the context of recent category models. Specifically, we examine whether investor sentiment and market frictions specific to one category can affect the returns on assets belonging to the other category. With recent additions of several real estate investment trusts (REITs) into general stock market indices as a natural experiment, we find support for spillovers of such nonfundamental effects, as evidenced by the increased return correlation between REITs that remain outside the index and the index stocks. Further analysis reveals that market frictions play a greater role than investor sentiment.     

Credit Restrictions and the Market for Commercial Real Estate Loans

This paper develops a model of the market for commercial real estate loans based on the variables used by investors and lenders in property decision-making: the income capitalization (cap) rate, the debt-coverage ratio and the loan-to-value ratio. Empirical results for aggregate United States real estate originations and commitments for 1970–93 indicate that loan demand is sensitive to the cap rate and to building permit issuance. The dominant criterion used by lenders is the debt-coverage ratio as opposed to the loan-to-value ratio, a finding which may have implications for underwriting standards and credit policy.     

Improving the productivity of vertisols in the Accra plains of Ghana using leguminous cover crops

The productivity of the Vertisols of the Accra plains is low, in spite of its high potential fertility. This could be attributed to physical constraints and low organic matter content. A study was conducted at the Agricultural Research Centre, Kpong, to assess the suitability of Mucuna pruriens, Mimosa invisa and Stylosanthes guianensis, in short fallows, for improving the fertility, physical properties, moisture conservation and weed control in the case of these soils. Mucuna had the highest biomass of 5.3tha^?1, as opposed to 4.1tha^?1 under natural fallow. The mucuna and stylosanthes biomass had comparatively higher total N values (240.75 and 203.51kgha^?1, respectively) than mimosa and natural fallow (152.46 and 162.74kgha^?1, respectively). Soil organic carbon, one year after the incorporation of cover crops, was found to be relatively higher under the cover crops (mucuna, stylosanthes and mimosa) than it was under natural fallow. Bulk densities were thus lower under the cover crops than they were under natural fallow. Also, soils under the cover crops had higher total porosity, water infiltration rates and moisture storage than they did under natural fallow. Weed cover, 115 days after planting maize, was significantly lower in plots previously under Mucuna pruriens than it was under natural fallow, Stylosanthes guianensis and Mimosa invisa. There was a negative linear correlation between cover crop biomass and weed density (R ² = 0.593–0.805). Grain and stover yields of maize were higher under Mucuna pruriens than they were under natural fallow (138 and 70 per cent higher, respectively). Burning of the natural fallow resulted in greater weed growth than when the material was worked into the soil (41 and 8 per cent, respectively). Grain yield was significantly greater under mucuna than it was under natural fallow (3.1 and 1.3tha^?1, respectively).     

Real Estate and Economies of Scale: The Case of REITs

Building on past research in the economies-of-scale debate, we test for scale economies in real estate investment trusts (REITs) by examining growth prospects, revenue and expense measures, profitability ratios, systematic risk and capital costs. Overall, we find that large REITs are increasing growth prospects while succeeding at lowering costs, leading to a direct relationship between firm profitability and firm size. Additionally, we find an inverse relationship between equity betas and firm size, and for all cost of capital measures we find significant scale economies. Further evidence from the stochastic frontier analysis suggests efficiency opportunities appear possible through continued growth and consolidation in REITs.     

Credit Availability and the Structure of the Homebuilding Industry

We investigate the role of disruptions to the structure of the homebuilding industry due to fluctuations in the availability of bank credit. We find a sustained decline in the large private homebuilder market share series over the period from 1988 to 1993 when many banks with deteriorated health reduced their lending in order to raise capital ratios. Regression analysis at the metropolitan statistical area level supports the hypothesis that, in areas where banks were less well capitalized and had more problem construction loans, the market shares of large private homebuilders that relied primarily on bank credit to finance their production suffered at the expense of the public homebuilders that had better access to external funds, in large part due to their direct access to public capital markets.     

Thy Neighbor’s Mortgage: Does Living in a Subprime Neighborhood Affect One’s Probability of Default?

This article focuses on the potential externalities associated with subprime mortgage origination activity. Specifically, we examine whether negative spillover effects from subprime mortgage originations result in higher default rates in the surrounding area. Our empirical analysis controls for loan characteristics, house price changes and alternative loan products. Our results indicate that, after controlling for these characteristics, the concentration of subprime lending in a neighborhood does not lead to greater default risks for surrounding borrowers. However, we do find that more aggressive mortgage products (such as hybrid adjustable rate mortgages and low/no‐documentation loans) had significant negative spillovers on other borrowers. Stated differently, the aggressive alternative mortgage designs were more toxic to the housing and mortgage market than previously believed.     

The Fractal Structure of Real Estate Investment Trust Returns: The Search for Evidence of Market Segmentation and Nonlinear Dependency

This article presents a further test for market segmentation between the real estate market and the capital markets. We use rescaled range analysis developed in the fractal geometry literature to test for nonlinear trends in the returns series for different asset classes. We make three major conclusions: (1) the stock market displays tendencies consistent with a random walk, (2) portfolios of mortgage and equity REIT returns display tendencies consistent with a random walk and, (3) conditional upon the methods used, segmentation does not exist between different real estate markets and between the real estate and stock markets.     

Spatial variation of nonmetropolitan industrial location

This study examines economic development and industrial location in the rural Southeast using a varying coefficient model. Empirical results generated with a Poisson regression show that the varying coefficient model is appropriate and that the posited variables help explain the number of manufacturing firms which have located to a rural county. The model distinguishes between the ability of a county to attract industry both independent of distance and as a function of the distance to the nearest strategic urban center. Differences exist between the locational preferences of traditional industry and nontraditionial (diversification-enhancing) industry.     

Individual Moral Development and Ethical Climate: The Influence of Person–Organization Fit on Job Attitudes

This research examines how the fit between employees moral development and the ethical work climate of their organization affects employee attitudes. Person–organization fit was assessed by matching individuals' level of cognitive moral development with the ethical climate of their organization. The influence of P–O fit on employee attitudes was assessed using a sample of 304 individuals from 73 organizations. In general, the findings support our predictions that fit between personal and organizational ethics is related to higher levels of commitment and job satisfaction and lower levels of turnover intent. Ethical P–O fit was related to higher levels of affective commitment across all three ethical climate types. Job satisfaction was only associated with ethical P–O fit for one of the three P–O fit variables and turnover intentions were significantly associated with two of the ethical P–O fit variables. The most consistent effect was found for the Conventional – Caring fit variable, which was significantly related to all three attitudes assessed. The weakest effect was found for the Preconventional – Instrumental fit variable, which was only predictive of affective commitment. The pattern of findings and implications for practice and future research are discussed.