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REIT Asset Sales: Opportunistic Versus Liquidation

Real Estate Economics

Published online on

Abstract

This study provides novel evidence that the outcome from REIT sales of office and apartment property is signaled in the transaction price managers accept relative to the fundamental value. The identification strategy recognizes opportunistic sales as sold at prices above fundamental value. Opportunistic sales are followed by positive abnormal returns, measured relative to the market and associated benchmark indices. Assets sold below fundamental value are liquidated by firms with low profitability, low cash and low investment opportunities. Discounted transactions experience zero abnormal returns. Returns following asset sales are influenced by accounting measures, the flow of funds and financial constraints.