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Strategic Transactions around REIT Conversions

Author

Listed:
  • Pascal Frömel
  • Dominik Wagner
  • René-Ojas Woltering
  • David H. Downs
  • Steffen Sebastian

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.

Suggested Citation

  • Pascal Frömel & Dominik Wagner & René-Ojas Woltering & David H. Downs & Steffen Sebastian, 2022. "Strategic Transactions around REIT Conversions," Journal of Real Estate Research, Taylor & Francis Journals, vol. 44(4), pages 473-490, October.
    • Handle: RePEc:taf:rjerxx:v:44:y:2022:i:4:p:473-490
    DOI: 10.1080/08965803.2022.2041264
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