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Factors Influencing the Direct Costs of Property Trust Ipos

Author/s: William Dimovski, Robert Brooks

Date Published: 1/01/2007

Published in: Volume 13 - 2007 Issue 1 (pages 2 - 15)

Abstract

Underwriting, legal, accounting and valuation costs average around 3.3%, 0.39%, 0.23% and 0.12% of proceeds raised and are substantial costs to property trust initial public offering (IPO) issuers. As such, identifying factors that influence these costs is important. This paper investigates factors influencing these costs as well as the total direct costs of raising equity capital by property trust IPOs in Australia from 1994 to 2004. The results suggest clear economies of scale in direct costs. In addition, IPOs that employ more debt are likely to have higher capital raising costs while those that have proportionally higher net asset values and offer stapled securities (and likely to be engaged in property development activities) have lower capital raising costs.

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Keywords

Costs of Capital Raising - Initial Public Offerings - Ipos - Property Trusts

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