A Comparative Analysis of R.E.I.T.s, R.E.O.C.s and P.R.E.O.C.s Using a Stochastic Frontier Approach

摘要

Although the first real estate investment trust (R.E.I.T.) was created in 1960s, according to the latest data of 2018, only 13 out of 28 European countries had such systems on their stock-exchange. Many economists have published detailed studies stating the advantages of R.E.I.T.s, however, the developing part of Europe is still slow to react with legislative initiatives. This article extends the existing research on R.E.I.T. efficiencies and compares them to private real estate operating companies (P.R.E.O.C.s) as well as real estate operating companies (R.E.O.C.s) across the U.S., Canada and the European Union by using a stochastic frontier, panel-data models of translog cost functions while trying to identify whether a significant benefit arises from different corporate structures. The results confirm that out of 666 companies under consideration, all types of real estate (R.E.) firms achieve economies of scale. Furthermore, in the time period of 2014–2016, REITs on average were less reliant on short-term debt, they had a lower debt-to-equity ratio, were more efficient at managing costs in three stochastic translog models and partially in fourth, had a stronger economy of scale effect when their assets size increased, and remained competitively profitable though were outperformed in the profit and revenue area.