selloffs_CCS VALUE CREATION IN REIT PROPERTY SELL-OFFS: THE EFFECTS OF CHANGES IN CORPORATE FOCUS AND CAPITAL STRUCTURE

This paper examines major sales of real property by public U.S. Real Estate Investment Trusts (REITs) 1996-2002. In contrast to results reported for REIT sell-offs prior to 1990, but consistent with findings for conventional firms that sell off real estate, we find that abnormal shareholder returns are significantly positive overall. This result suggests that the finding of zero abnormal returns in previous REIT studies may result from the low degree of visibility of these firms in earlier years. Shareholder returns are significantly higher when the transaction is motivated by an expressed intention to increase property type corporate focus, a finding that adds to the literature supporting the view that diversification is negative for shareholder value. Shareholder returns are positively related to management's stated intention to apply sale proceeds to the repurchase of common shares, and negatively related to management's intention to reduce long-term debt, evidence that decisions regarding the uses of sell-off proceeds convey valuable information to the market