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The Wealth Effects of REIT Property Acquisitions and Dispositions: the Creditors’ Perspective

Author

Listed:
  • Qing Li

    (University of Florida)

  • David C. Ling

    (University of Florida)

  • Masaki Mori

    (University of Reading)

  • Seow Eng Ong

    (National University of Singapore)

Abstract

Prior studies of REIT property transaction activity focus on shareholder wealth effects. This study examines the effects of property acquisitions, dispositions, and overall trading activity on unsecured bond spreads, credit rating changes, and rating outlooks using a sample of the listed equity REITs in the U.S. We find that active property trading in general decreases creditors’ wealth, but this negative impact is significantly mitigated for REITs with positive NAV premiums and when REITs use sale proceeds to pay down debt after the transactions. We also find that property transactions followed by an increased geographic focus significantly increase bond yield spreads and decrease the probability of credit rating upgrades.

Suggested Citation

  • Qing Li & David C. Ling & Masaki Mori & Seow Eng Ong, 2020. "The Wealth Effects of REIT Property Acquisitions and Dispositions: the Creditors’ Perspective," The Journal of Real Estate Finance and Economics, Springer, vol. 60(3), pages 308-337, April.
    • Handle: RePEc:kap:jrefec:v:60:y:2020:i:3:d:10.1007_s11146-018-9677-9
    DOI: 10.1007/s11146-018-9677-9
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    References listed on IDEAS

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    2. Walter D’Lima & Paul Schultz, 2022. "Buy-to-Rent Investors and the Market for Single Family Homes," The Journal of Real Estate Finance and Economics, Springer, vol. 64(1), pages 116-152, January.

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    More about this item

    Keywords

    REIT; Property transaction; Bond yield spread; Credit rating change;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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