Value Implications of REITing and De-REITing*

David Ling (), Sugata Ray (), Alan Tidwell () and Luqi Xu ()
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David Ling: University of Florida
Sugata Ray: University of Alabama
Alan Tidwell: University of Alabama
Luqi Xu: College of Charleston

The Journal of Real Estate Finance and Economics, 2025, vol. 71, issue 2, No 5, 285-313

Abstract: Abstract We explore the determinants and value implications of publicly traded real estate companies converting to real estate investment trusts (REITs), which we term REITing, and publicly-traded REITs giving up their REIT status, termed de-REITing. Non-REIT real estate firms that pay relatively high dividends and have high income tax ratios are more likely to convert to a REIT; while REITs that have lower pretax incomes, dividend adjusted operating cash flows, and higher leverage ratios are significantly more likely to de-REIT. REITing generates significant positive abnormal returns (ARs) around the REITing announcement. These positive ARs are concentrated in firms with higher income tax liabilities and firms paying larger dividends pre REIT-conversion. De-REITing announcements generate significant negative ARs, which are mitigated when the de-REITing firm has low potential tax liabilities, or when the firm is cash flow constrained with respect to its dividend payment. Based on these results, we argue that the degree to which REITing (de-REITing) decisions are value generating (destroying) depends on the magnitude of potential tax and dividend implications. We also examine the longer run valuation effects of REITing and de-REITing decisions and find no evidence of a reversion of the short-run announcement effects.

Keywords: REITing; de-REITing; REIT-conversion; REITs (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-023-09943-2

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