Portfolio Sales

 Previous studies on portfolio sales focus on the stock price effects from

announcements of portfolio sales. A portfolio sale is defined as a transaction in which

two or more unrelated properties are sold to the same buyer. Studies that are based on

property sales prior to 1992 found no abnormal returns associated with portfolio sales

announcements. Glascock, Davidson and Sirmans (1991) examined 51 real estate

portfolio purchases prior to 1986 and find that abnormal returns are insignificantly

different from zero. McIntosh, Ott and Liang (1995) reached a similar conclusion based

on a 54-transaction sample during 1968-1990, in which all of the acquirers are Real

Estate Investment Trusts (REITs). Booth, Glascock and Sarkar (1996) studied a sample

of 94 portfolio acquisitions and also failed to observe any significant abnormal returns.

These findings are consistent with expectations in competitive markets, since they signify

that no change in shareholder wealth results whether assets are acquired and sold

separately or together.

 However, a more recent study based on the "modern" post-1992 REIT market by

Campbell, Petrova and Sirmans (2003) finds average abnormal returns for the acquirer of

approximately 0.5 percent in a study based on 209 portfolio acquisitions during 1995-

2001. As the authors point out, these results suggest a clear change in the regime of such

transactions, post 1992, when new regulations relaxed the restrictions on ownership

concentrations for Real Estate Investment Trusts and thereby led to an increase of capital

flows to REITs, especially by institutions. Campbell, Sirmans and Petrova (Ibid.) present

evidence that the observed returns are related to the positive effect of reconfirming

geographical focus, signaling by taking on private debt and private placement of stock

with institutions.