简介:Investorsshouldalwaysargueaboutmanagementfeesbecauseoftheirimpactonnetperformancethatcanbesubstantial.Thisespeciallyforinvestments,likerealestate,whichrequireintensivemanagement.However,differentfromtraditionalmutualfundsthatareusuallyrelatedtothegrossvalueoftheassetsundermanagement,butsimilartootherfinancialindustrysectors(e.g.hedgefundsandprivateequityfunds),REITmanagers’compensationstructuretypicallyprovidesabasicallyfixedpaymentbasedalternativelyongrossassetvalue(GAV)ornetassetvalue(NAV).Inaddition,managersusuallyalsogainaperformancefee.ThepaperanalyseshowthetwoalternativecompensationschemesinfluenceREITs’investmentdecisionsandcapitalstructureand,consequently,REITs’sharevalueandperformance.Thefinalissueaddressediswhether—andunderwhichconditions—onecompensationschemeissuperiortotheother.Duetothe(usual)marketpricediscountonNAVs,bothfeestructuresincentivisemanagerstoleverage—eveninatax-freeenvironment—inordertomaximizethemanagementfees.However,theleveragemotivationisstrongerforGAV-basedthanforNAV-basedREITs,whicharealsoexpectedtobemoreselectiveininvestmentdecisions.Overall,consideringinitialfeepercentage,GAV-basedREITsareexpectedtoexecutehighermanagementfeesthanNAV-basedREITsduetotherelevantleverageeffect.Moreover,debtrecourseproducesdifferenteffectsonsharevalueifmeasureduponmarketpriceornetassetvalue.TheempiricalanalysisfocusesonpublicItalianREITs(2002-2012).Theresultsseemtosupportthetheoreticalexpectations.GAV-basedREITsexperiencehigherdebttrendsandlevelsthanNAV-basedREITs.Atthesametime,GAV-basedREITsregisterlowerrealestateassetreturnsgrossandnetofmanagementfeesforbothcurrentandgrowthyields.DifferencesinthereturnsleadtopermanenthigherperformancesovertotalreturnindexesofNAV-basedREITscomparedtoGAV-basedREITs.