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The Performance of Acquisitions in the Real Estate Investment Trust Industry

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  • Olgun Fuat Sahin

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    (Minnesota State University Moorhead, 1104 Seventh Avenue South, 2070 Center for Business, Moorhead, MN 56563)

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    Abstract

    This study examines the performance of acquisitions in the Real Estate Investment Trust (REIT) industry around the acquisition announcement and in the long-run. The results suggest that the acquiring REITs experience statistically signi?cant negative abnormal returns while the target REITs earn statistically signi?cant positive abnormal returns during the three-day period around the announcement. The long-run performance of the acquiring REITs is analyzed using size benchmark portfolios with the buy-and-hold, cumulative average and mean calendar time abnormal returns, as well as the Fama–French Three Factor Model. None of the other methods detect signi?cant abnormal returns in the long-run with the exception of the buy-and-hold abnormal return. Further analysis shows that the long-run positive buy-and-hold abnormal return is consistent with an unexpected decline in cost of equity after acquisitions.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol27n03/04.321_342.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 27 (2005)
    Issue (Month): 3 ()
    Pages: 321-342

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    Handle: RePEc:jre:issued:v:27:n:3:2005:p:321-342

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

    Order Information:
    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    Cited by:
    1. David Ling & Milena Petrova, 2011. "Why Do REITs Go Private? Differences in Target Characteristics, Acquirer Motivations, and Wealth Effects in Public and Private Acquisitions," The Journal of Real Estate Finance and Economics, Springer, vol. 43(1), pages 99-129, July.
    2. Robert Campbell & Erasmo Giambona & C. Sirmans, 2009. "The Long-Horizon Performance of REIT Mergers," The Journal of Real Estate Finance and Economics, Springer, vol. 38(2), pages 105-114, February.
    3. Kiplan Womack, 2012. "Real Estate Mergers: Corporate Control & Shareholder Wealth," The Journal of Real Estate Finance and Economics, Springer, vol. 44(4), pages 446-471, May.

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