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Pricing Efficiency and Investor Reactions in J-REIT Property Acquisitions: An Analysis of Acquisition Price and Fair Value

Author

Listed:
  • Akira Ota

    (Tokyo City University, Tokyo, Japan)

  • Hiroshi Takahashi

    (Keio University, Yokohama, Japan)

Abstract

The Japanese real estate investment trust (J-REIT) market is the second-largest REIT market globally and has played a key role in property acquisitions in Japan over the past two decades. This study examines pricing efficiency in J-REIT acquisitions over a period of 20 years and focuses on whether properties are acquired at underpriced or overpriced amounts relative to fair values and how investors reacted. This study finds that J-REITs acquire the most properties below fair value, with significant variation across types of assets and sellers. Notably, acquisitions from related parties tend to be less underpriced as opposed to those from third parties. This study also assesses investor reactions to underpriced acquisitions by analyzing the cumulative abnormal returns of J-REIT investment unit prices around acquisition announcements with seasoned equity offerings. Our findings indicate that investors are not highly attentive to differences between acquisition prices and fair values, as they do not react to the amount of underpriced acquisitions. This study contributes to understanding valuation dynamics in J-REIT acquisitions and offers insight into investor sentiment regarding pricing efficiency. The work underscores the importance of assessing the fairness and strategic implications of property acquisitions.

Suggested Citation

  • Akira Ota & Hiroshi Takahashi, 2025. "Pricing Efficiency and Investor Reactions in J-REIT Property Acquisitions: An Analysis of Acquisition Price and Fair Value," International Real Estate Review, Global Social Science Institute, vol. 28(4), pages 529-553.
    • Handle: RePEc:ire:issued:v:28:n:04:2025:p:529-553
    DOI: 10.53383/100413
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    References listed on IDEAS

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    1. William G. Hardin, III & Marvin L. Wolverton, 1999. "Equity REIT Property Acquisitions: Do Apartment REITs Pay a Premium?," Journal of Real Estate Research, American Real Estate Society, vol. 17(1), pages 113-126.
    2. S. Akin & Val Lambson & Grant McQueen & Brennan Platt & Barrett Slade & Justin Wood, 2013. "Rushing to Overpay: Modeling and Measuring the REIT Premium," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 506-537, October.
    3. Mamoru Nagano, 2013. "Real Estate Securitization and the Debt Maturity Structure: Evidence from J-REITs," International Real Estate Review, Global Social Science Institute, vol. 16(3), pages 252-273.
    4. Ota, Akira & Takahashi, Hiroshi, 2025. "Impact of financing method on J-REIT unit price around seasoned equity offerings: Dilution and borrowing ratio effects on abnormal returns," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    5. Paul Gallimore & Marvin Wolverton, 2000. "The objective in valuation: a study of the influence of client feedback," Journal of Property Research, Taylor & Francis Journals, vol. 17(1), pages 47-57, January.
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