University of Cambridge > > Land Economy Departmental Seminar Series > Fire sales: Good deals or price of low quality?

Fire sales: Good deals or price of low quality?

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Using a novel and large transaction-level data on commercial real asset sales of public firms between 2000 and 2013, we find that distressed firms’ properties are sold at a significant discount when (1) the property is not deployable for alternative uses, (2) the number of potential buyers in the geographical region is few, and (3) the firm operates in a concentrated industry where there are few firms that could pay for the best-use price. When we compare the characteristics of the asset that was selected by the manager to be sold with the characteristics of other real estate assets held in a firm’s real estate portfolio, we find evidence that firms seek to sell the assets that are less likely to be discounted. We show that these results are not explained by the quality of sold assets (as measured by vacancy, renovation and redevelopment status of the asset). Finally, we show that current loan spreads increase with the collateral discount in the value of real estate holdings in case of a future financial distress event.

Co-authors for paper: Professor Irem Demirci, University of Mannheim and Professor Ümit Gürün, University of Texas at Dallas


Erkan Yönder is an assistant professor of finance and real estate at Ozyegin University. He received his PhD degree in Finance and Real Estate at Maastricht University in 2013. He also holds a second PhD degree in Economics from the Middle East Technical University. Dr. Yönder’s main research interests consist of securitized real estate (REITs), corporate finance, behavioral finance, green buildings and corporate sustainability. He has written several papers, some of which have been accepted for publication by the academic journals such as the Journal of International Money and Finance and the Real Estate Economics, and the Journal of Economic Geography. Additionally, Dr. Yönder has a book chapter published by the University of Pennsylvania Press. His research has been recognized and funded by research institutions such as the Real Estate Research Institute (RERI) and the Principles for Responsible Investment (PRI).

This talk is part of the Land Economy Departmental Seminar Series series.

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