Equity versus Asset Acquisitions in the REIT Industry

Abstract

Real estate investment trust (REIT) acquisitions are recurrent capital allocation decisions that impact the value and operations of the firm. Although REIT equity acquisitions have received considerable attention in the literature, the effects of major asset acquisitions require further scrutiny. We examine the impact of acquisition type on REIT market returns and operating performance. The results suggest no significant differences in market reaction to the form of acquisition. We interpret this as evidence in favor of efficiency in REIT acquisition decisions. However, the results suggest a net positive effect in operating performance of asset acquisitions relative to equity acquisitions, conditioned by firm and deal characteristics. Overall, our results suggest that asset acquisitions are more efficient in the long run. We provide evidence that the type of acquisition is relevant to firm operations.