We find evidence of a value premium of 10.3 per cent per annum for international developed REITs over the period Q2-1993-Q2-2013. REITs with a high book value of equity compared to their market value of equity (in case of REITs book value of equity is approximately equal to Net Asset Value (NAV)) perform significantly better than REITs with a low book to market multiple. Even after controlling for risk factors in the single factor CAPM model or the Fama French three factor model, the value strategy provides significant alpha. This suggests value premium is the result of naive extrapolation of past performance by real estate investors rather than a commensurate reward for risk. For real estate practitioners, the results provide the basis for the formulation and implementation of a viable indirect global investment strategy.
van der Werf, Y. M., & Huibers, F. (2014). Value premium in international REITs