Shuffling through the Bargain Bin: Real-Estate Holdings of Public Firms. (21st June 2019)

• Record Type: Journal Article
• Authors: Demirci, Irem; Gurun, Umit G; Yönder, Erkan
• Is Part Of: Review of finance. Volume 24:Number 3(2020)
• Page Start: 647
• Page End: 675
• Publication Date: 2019-06-21
• Subjects: G32 -- G33 -- R33; Collateral discount -- Financial distress -- Commercial real estate -- Redeployability -- Loan pricing; Finance -- Europe -- Periodicals; Financiën; Finance; Periodicals; 332.09405
• DOI: 10.1093/rof/rfz010
• Languages: English
• ISSNs: 1572-3097

Abstract

Abstract: Constructing a novel database on the real-estate holdings of public firms, we show that distressed firms sell their real-estate assets at a discount relative to healthy firms. We find that distress discount in real-estate assets is less pronounced for sellers with less liquidity-constrained industry peers and in machinery-heavy industries. We also document that asset redeployability and the availability of potential buyers are two important property-specific determinants of the distress discount. Additionally, firms' property portfolios that are less redeployable with less potential buyers exacerbate the negative impact of financial distress on the cost of borrowing.