Cornell Hotel Real Estate Investment Funds Study Finds Anomaly in REIT Dividend Patterns
Fixed share prices of nontraded hotel REIT put long-term investors at a disadvantage
An analysis of so-called “nontraded REITs” finds that their structure puts long-term investors at a disadvantage, according to a new report about hotel real estate investment funds issued by Cornell's Center for Hospitality Research. The report, “Nontraded REITs: Considerations for Hotel Investors,” finds that REITs – short for real estate investment trusts – can be an attractive buy-and-hold investment for income-oriented investors because of their high dividend payouts. However, the analysis by authors John B. (Jack) Corgel and Scott Gibson reveals that those payouts are diminished for long-term holders. The report is available at no charge from .
Shares of Hotel Real Estate Investment Funds Should Be Revalued to Reflect Asset-Value Changes
While Corgel and Gibson agree that the relatively high dividend payouts for hotel real estate investment funds mitigate the reduced return for long-term holders, they suggest that a more equitable approach might be to revalue the shares to reflect asset-value changes. “This would allow all investors to share in the appreciation of the underlying assets,” Corgel pointed out. “Instead, what we found is that many REITs were paying out dividends in excess of their funds from operations, which is an unstable situation.”
Corgel and Gibson's hotel REIT report offers suggestions for the due diligence that investors should apply to this investment. Gibson is a professor at the Mason School of Business at the College of William and Mary.
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Center for Hospitality Research | A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 75 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly (formerly the Cornell Hotel and Restaurant Administration Quarterly). To learn more about center and its projects, visit .
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