Sell‐Offs of U.S. Real Estate: The Effect of Domestic versus Foreign Buyers on Shareholder Wealth

Abstract

Large foreign acquisitions of U.S. real estate always seem to generate considerable public concern. Most recently the reaction has been to Japanese purchases, but similar reactions occurred to Arab petro‐dollar purchases in the early 1970s. This study examines the impact of the buyer's nationality on the change in the wealth of the selling firm's shareholders for voluntary sell‐offs of U.S. real estate. In general, this study indicates that voluntary sell‐offs of real estate assets result in a significant increase in the wealth of the selling firm's shareholders. However, the change in the wealth of the selling firm's shareholders for U.S. buyers was not significantly different from that for non‐U.S. buyers. Since no advance is indicated for foreign buyers over domestic buyers, laws or regulations hindering the foreign acquisition of U.S. real estate cannot be supported. The assumption of a “non‐level playing field” for U.S. real estate investors who bid against foreign firms for U.S. real estate assets is not confirmed.