1 / 11

Wealth Effects on Unit Holders Following Property Company and A-REIT Rights Issues

Wealth Effects on Unit Holders Following Property Company and A-REIT Rights Issues. Bill Dimovski Deakin University Australia. What are Rights Issues?. Renounceable Non-Renounceable. So how important is Australia?. WFE ranks ASX as 11 th largest in world

maida
Download Presentation

Wealth Effects on Unit Holders Following Property Company and A-REIT Rights Issues

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Wealth Effects on Unit Holders Following Property Company and A-REIT Rights Issues Bill Dimovski Deakin University Australia

  2. What are Rights Issues? Renounceable Non-Renounceable

  3. So how important is Australia? • WFE ranks ASX as 11th largest in world • Third largest in raising IPO and SEO capital in 2009 • Raised over 11% of SEO capital raised by 52 member exchanges • A-entities raised A$60 billion in equity capital in 2008 (A-REITs raised nearly $10 billion in 2008 and 2009)

  4. So how important are A-REITs? • Own over A$200 billion in assets • 6% of the ASX • 14% of the global REIT cap • Major institutions and pension funds are investors (Westfield - institutions own 66%) • Raised over A$22 billion by rights issue during 2001-9 (3 times that raised by IPO during the same period.

  5. Past Literature • Underwriting costs as % of proceeds – SEO or rights offerings not REITs • Smith (1977), US 71-75, 3.6% • Lee et al (1996) US 90-94, 5.44% • Corwin (2003) US 80-98, 5.32% • Armitage (2000), UK 85-96 1.53% • Martin-Ugedo (2003), Spain 89-97 2.0% • Bairaji and Dimovski (2011), REITs US , 1996-2010 4.2%, • Dimovski (2011) REITs Aus 2.9% • Discount • Balachandran et al. (2008), Australia 95-05 around 18%, Owen and Suchard (2008), Australia 93-01, around 19%. • Armitage (2000) UK 21% • Smith (1977) US 8% • REITs - Ghosh, Nag Sirmans (2000) 1.14%, Goodwin PhD2008 – 1.77% • Dimovski (2011) REITs Aus 9.5%

  6. Aim • This paper investigates characteristics of rights offerings by A-REITs and Listed Property Companies during Jan 2001-June 2009 to see if subscribers increased wealth • Includes a comparison of the share price following the issue to the theoretical ex-rights share price • Example – a security holder has 1000 securities at $10 each prior to rights issue; 1 for 1 rights offer at a subscription price of $9. The holder now has 2000 securities totalling $19000 • Theoretical share price $19000/2000 = $9.50

  7. Data • The sample period is from 2001-June 2009 • The databases used are FinAnalysis and SNL which allow data to be downloaded from ASX • Over A$22 billion raised • 71 observations, 62 A-REITs, 65 underwritten, 11 offered renounceable rights • Only 28 of the 71 showed > than theoretical ex-rights share price – all A-REITs

  8. Other Summary Stats • Ave percwealth – -2% (median -2%) • Ave positwealth– 39% (median 0%) • Ave proceeds - A$314m (median 126m) • Ave held by top 20 s/holders – 66% • Post2007 – 30% (21 in number) after August 2007 • Mktsenti – -2 /100th of 1% • Discount – 10.2% (median 9%) • Ave %uwritten – 86% • Pplacealso– 38%

  9. Models OLS and Logit

  10. Results • Table 2 – all 71 observations • Higher perc underwritten, higher percwealth (OLS) and higher chance of positwealth (Logit) • Tables 3 and 4 (no outliers) – A-REITs • Those rights issues after Aug 2007 – more chance of wealth for subscribers. • Also lower disc and higher perc uwritten, higher chance of wealth

  11. Conclusion • The GFC has been a different period for property entities for rights offerings • The need for new equity by REITs + Prop Cos has allowed subscribers to be more likely to increase their wealth by subscribing. • The PercUwritten variable is interesting – more underwritten, more likely subscribers increase their wealth. • More highly discounted offerings, less likely subscribers increased their wealth.

More Related