Strategic Transactions around REIT Conversions. Issue 4 (2nd October 2022)

• Record Type: Journal Article
• Authors: Frömel, Pascal; Wagner, Dominik; Woltering, René-Ojas; Downs, David H.; Sebastian, Steffen
• Is Part Of: Journal of real estate research. Volume 44:Issue 4(2022)
• Page Start: 473
• Page End: 490
• Publication Date: 2022-10-02
• Subjects: Mergers and acquisitions -- REITs -- REIT-conversions; G34 -- R30; Real estate business -- United States -- Periodicals; Real estate investment -- United States -- Periodicals; Real estate business -- Periodicals; Periodicals; 333.330973
• DOI: 10.1080/08965803.2022.2041264
• Languages: English
• ISSNs: 0896-5803

Abstract

Abstract: This article examines the conversion-related mergers and acquisitions (M&A) activity and post-conversion performance of 80 international Real Estate Operating Companies (REOCs) that adopted Real Estate Investment Trust (REIT) status. In the years prior to the conversion, we document an increased M&A deal activity that is in part driven to fulfill regulatory REIT requirements. We find that REOCs are willing to pay a premium above the market valuation to acquire desired portfolios. Moreover, we document that the REIT status enhances equity inflows, driving increased M&A transaction activities and deal volume. While converted REITs outperform their peers over the long run, we find that a lower (higher) level of restructuring activity is associated with even higher (risk-adjusted) performance.