THE IMPACT OF ACQUISITION AND DISPOSITION ACTIVITIES ON US REITS DURING COVID 19

Abstract

COVID 19 is a unique event that caused a tumble in US REIT performance and has long-term effects on many US REITs due to its effect on occupancy rates and rents. This paper aims to study the impact of acquisition and disposition activity which is one of the key corporate activities that REITs undertake during a unique time such as COVID 19. This study will be carried out using an events study methodology to observe the magnitude and direction of abnormal returns after acquisition announcements from US REITs during COVID 19. It would be useful to investors and REIT managers to find out if the market reacts positively or negatively towards acquisition activity during COVID 19. Furthermore, a pooled ordinary least squares regression is carried out to find out any relationship between key variables such as gross acquisition, gross disposition, capitalisation rate and dividends paid during COVID 19. This study found that COVID 19 had little impact on the magnitude of acquisition and disposition activity by the US REIT. Acquisition and disposition activity also had little significant impact on capitalisation rates. However, it is found that acquisition and disposition activity is more positively correlated with the dividends paid during COVID 19. The events study also yielded results that showed significantly negative abnormal price returns within a 11-day event window surrounding the acquisition announcement. With these results collected, these findings shed light on how differently the market reacts to acquisition announcements during a circumstantial time like COVID 19.