The Wealth Effects of Property Acquisitions: Evidence from Japanese and Singaporean REITs

Posted: 31 Aug 2010 Last revised: 27 May 2011

See all articles by Joseph T. L. Ooi

Joseph T. L. Ooi

National University of Singapore (NUS) - Department of Real Estate

Seow Eng Ong

National University of Singapore (NUS) - Department of Real Estate

Poh Har Neo

National University of Singapore (NUS)

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2010

Abstract

This paper examines the wealth effects of 228 property acquisition announcements made by REITs publicly traded in Singapore and Japan, which are the two largest REIT markets in Asia. Adopting an aggressive growth-by-acquisition strategy, the newly listed REITs acquired a number of properties within a short time period. Despite their regular activities, we observe the acquisition announcements are associated with a significantly positive abnormal increase in shareholder wealth averaging 0.38% in a five day window around the event date. Controlling for the method of payment, buyer’s acquisition strategy, and seller’s relationship with the acquiring REIT, the regression results show that the likely sources of economic gains associated with acquisitions are economies of scale and better management by acquiring firms. We also find strong evidence that the market reacts less favorably to acquisitions involving a portfolio of properties as opposed to a single property, and weaker evidence that it reacts less favorably to mixed use acquisitions. These findings suggest the presence of premiums on transparency, and corporate focus.

Keywords: Asian REITs, property acquisitions, event-study

Suggested Citation

Ooi, Joseph T. L. and Ong, Seow Eng and Neo, Poh Har, The Wealth Effects of Property Acquisitions: Evidence from Japanese and Singaporean REITs (August 30, 2010). Real Estate Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1668877

Joseph T. L. Ooi (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Seow Eng Ong

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore
01-65-6516-3552 (Phone)
01-65-6774-8684 (Fax)

Poh Har Neo

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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