Summary
Investment in U.S. real estate is becoming increasingly competitive due to increased capital flows and improving industry fundamentals. U.S. Real Estate Investment Trusts (REITs) are seeking new investment opportunities through international investments. This paper reviews the research literature to determine possible investor reaction to international diversification strategies by U.S. REITs and identifies recent diversification trends. We find that the US REITs that specialize in corporate real estate are beginning to diversify internationally through joint ventures with local firms. Empirical evidence shows that Tobin's Q ratios are positively related to international investment in 2003 when asset size and property types are controlled for. The relationship, however, disappeared in a 2006 sample.
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Extract
Us Reit Internationalization and Firm Value
INTRODUCTION
U.S. real estate investment has become increasingly competitive in the last few years due to increased capital flows and improving industry fundamentals. Real estate sales to institutional investors, including hedge funds, overseas investors, private equity funds, partnerships, pension funds, and endowments, surged 50 percent in 2004 to $ 1 80 billion (PNC Real Estate Finance, 2005). The market capitalization of U.S. Real Estate Investment Trusts (REITs) increased 34% in 2004 to $275 billion as investors were attracted by high dividend yields and stable cash flows (National Association of Real Estate Investment Trusts, 2005). The weakening of the dollar against other western currencies has made U.S. real estate an attractive target for foreign capital (Froot and Stein, 1991). Foreign investment rose 59% in 2003 to $385 million and increased another 1 1 .9% i...See the full content of this document
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