Real Estate Holdings of Public Firms and Collateral Discount
Using a novel and detailed transaction-level data on commercial real estate assets, we construct real estate asset portfolios for a comprehensive set of public firms between 2000 and 2013. We find that a commercial real estate asset is sold at a significant discount when the real estate asset is not redeployable for alternative uses, when potential buyers in the geographical region are limited, and when the industry is concentrated. These effects are further exacerbated for distressed firms and cannot be fully reconciled by the quality of real estate assets. Bank loan spreads incorporate information on the expected commercial real estate discounts due to collateral channel.