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

Qing Li (), David Ling (), Masaki Mori and Seow Eng Ong ()
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Qing Li: University of Florida
Seow Eng Ong: National University of Singapore

The Journal of Real Estate Finance and Economics, 2020, vol. 60, issue 3, No 3, 308-337

Abstract: 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.

Keywords: REIT; Property transaction; Bond yield spread; Credit rating change (search for similar items in EconPapers)
JEL-codes: G23 G24 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11146-018-9677-9

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