THE WEALTH EFFECTS OF REITS PROPERTY DISPOSITIONS

Abstract

This study seeks to examine the wealth effects of U.S. REITs property dispositions from 2001 to 2009 and to assess the factors that contribute to the wealth effects.

To investigate the wealth effects of REITs property dispositions, this study employs the event study methodology. It finds that property dispositions by REITs generate positive significant abnormal shareholder returns around the disposition announcement date.

This study further analyzes the sources of value gains in property dispositions using cross sectional regressions. We identify capitalization rate (cap rate) as an important factor that affects the shareholder returns. This study presents fresh evidence on REITs property transactions. It confirms the important role of cap rate in influencing shareholder returns upon property dispositions.