Strategic Transactions around REIT Conversions

Pascal Frömel, Dominik Wagner, René-Ojas Woltering, David H. Downs and Steffen Sebastian

Journal of Real Estate Research, 2022, vol. 44, issue 4, 473-490

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.

Date: 2022
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DOI: 10.1080/08965803.2022.2041264

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