REITs Rewarded for Capital Structure Preparations
06/22/2015 | by Sarah Borchersen-Keto

Andrey Pavlov, professor of finance at Simon Fraser University, joined REIT.com for a video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

Pavlov presented a paper at the 2015 NAREIT/AREAUEA Real Estate Research Conference on REIT capital structures. Pavlov said his research underscored that investors rewarded those REITs that had prepared their capital structures for tough times in advance of the financial crisis.

“REITs and managers that prepared for the crisis actually did better,” he said, because investors viewed their preparation efforts as a sign of managerial quality.

“Shareholders saw those REITs as good [investment] opportunities and rewarded them during the downturn and the recovery,” Pavlov noted.

He added that the focus now is to better understand the decision-making process that resulted in conservative capital structures prior to the financial crisis.

“Was it an accident, or not? We believe it was not. For many of those REITs, it was a conscious decision, but exactly how did those discussions happen?”