Value Creation in REIT Property Sell-Offs

14 Pages Posted: 20 Nov 2006

See all articles by Milena T. Petrova

Milena T. Petrova

Bocconi University

Robert D. Campbell

Hofstra University

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

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Abstract

We examine major sales of real property by public U.S. Real Estate Investment Trusts (REITs) 1992-2002. We find that abnormal shareholder returns are significantly positive, a result that is consistent with findings for conventional firms that sell off real estate. Because REITs do not pay taxes, this finding supports the view that abnormal returns in real estate sell-offs by all types of firms are derived largely from asset allocation efficiencies and do not result exclusively from tax benefits. Shareholder returns are lower in sell-offs motivated by a desire to reduce long-term debt, as is consistent with financial theory regarding the information content of leverage decisions. Returns are inversely related to the firm's operating performance prior to the sell-off announcement, further supporting the case that improved asset efficiencies create value in real estate sell-offs.

Suggested Citation

Petrova, Milena T. and Campbell, Robert D. and Sirmans, C. F., Value Creation in REIT Property Sell-Offs. Real Estate Economics, Vol. 34, No. 2, pp. 329-342, Summer 2006, Available at SSRN: https://ssrn.com/abstract=945539 or http://dx.doi.org/10.1111/j.1540-6229.2006.00169.x

Milena T. Petrova

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Robert D. Campbell (Contact Author)

Hofstra University ( email )

Hempstead, NY 11549
United States

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

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