REIT Takeovers: An Evaluation of Barriers to Activity

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Conference Proceeding
PRRES conference Proceedings, 2011, pp. 1 - 21
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The global financial crisis in September 2007 resulted in the most significant downturn in global real estate markets in decades. Listed real estate markets were particularly affected, as the combination of high leverage and collapsing real estate values led to massive erosion of shareholder value and investment confidence. The Australian real estate investment trust (A-REIT) market suffered one of the largest downturns relative to its global peers. Currently the downturn appears to be abating, with most A-REITs having undertaken a process of balance sheet reconstruction, via asset sales, equity raisings and debt reduction. However, many A-REITs continue to trade at a significant discount to underlying net asset values. Such circumstances typically provide takeover opportunities that may unlock significant value. However, despite the potentially attractive values, we have seen limited recent takeover activity in Australia. This paucity of A-REIT takeovers suggests there may be barriers to such activity. This research examines the barriers to takeovers currently existing in the A- REIT market.
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