Market Reactions of Corporate Real Estate Sale and Leaseback Announcements: A Study of the Swedish Corporate Real Estate Sale and Leaseback Market

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Over the last decades the augmented core business focus have initiated an increase of divestitures of corporate real estate (CRE) divisions, representing real estate assets owned by a firm not primarily in the real estate sector. A popular alternative to pure divestments of the CRE assets is sale and leaseback transactions where the property is sold to another party and simultaneously leased back from the new owner. The market reactions of CRE sale and leaseback announcements of the selling firm have generally been investigated on the U.S. and European markets. Nevertheless, the Swedish CRE sale and leaseback market in specific remains exceptionally unexamined. Therefore, this thesis aims at examining the Swedish stock market’s reactions of CRE sale and leaseback announcements of the selling firm and the sources behind the reactions by using data obtained from 27 announcements of Swedish firms between the years of 1997 to 2007. We find that CRE sale and leaseback deals, on average, produce positive abnormal returns of 2.35 per cent at the event day and 2.42 per cent over the interval one day before to one day after the announcement. We furthermore conclude that the positive abnormal returns arise predominantly from CRE sale and leaseback deals which size is large in comparison to the market capitalization of the selling firm and deals announcing a large capital gain from the transaction in relation to the announced transaction value. We also discover that the tax rate of the lessee firm, on average, have a positive effect on the abnormal returns around the announcement, while the financial position of the lessee firm seem to have a low influence on the abnorma...