INDUSTRIAL S-REITS PROPERTY ACQUISITION LIKELIHOOD AND ACQUISITION SIZE DRIVING FACTORS

Abstract

This paper investigates the different variables that affects property acquisition likelihood and acquisition size of Industrial Singapore REITs (S-REITs). The study period is from November 2002 to December 2015 and covers both local and overseas acquisitions. We first investigate the impact of multiple general and financial characteristics of the REITs as well as market conditions and found that smaller industrial REITs that have lower profitability in terms of ROA and have higher cash stocks and funds raised through equity issuance were to be more likely property acquirers, especially so when market sentiments are better. Next we looked at REITs governance variables impact on acquisition likelihood to determine if there exist agency problem in the form of excessive acquisition for manager’s private benefit. Little evidence was found for the case of poorer governance resulting increased propensity for acquisition. Lastly, we examined factors affecting acquisition size and found larger REITs that divested more within the past year and had poorer share price return were found to conduct larger acquisitions, especially when the market is low.