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Real Estate Investment Trusts (REITs) are a globally recognized form of real estate ownership that offer tax benefits at a corporate level. Despite their clear advantages, however, a significant share of potentially eligible Real Estate Operating Companies (REOCs) do not opt for conversion to a REIT structure. This paper examines 80 REOC-to-REIT conversions across 13 countries. We find REIT conversions are generally driven by the extent of country-specific tax benefits. They are also more likely following prior conversions by other REOCs, and in countries with a larger share of extant REITs. REIT conversions may be motivated by NAV discounts, especially if management's compensation is highly equity-based. This illustrates the importance of aligning the interests of management and shareholders. On the other hand, relatively restrictive REIT criteria, such as the disclosure and taxation of hidden values during the conversion process, are associated with significantly lower conversion probabilities. Countries that have eased REIT criteria have subsequently seen significantly more conversions.

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This paper examines conversion-related M&A activity and the post-conversion performance of 80 Real Estate Operating Companies (REOCs) that chose to adopt Real Estate Invest-ment Trust (REIT) status. We observe distinctly higher M&A activity in the years around conversion dates and relatively higher premiums in conversion-related deals. The REIT for-mat attracts equity from investors more readily than the REOC format, which explains the increase in postconversion M&A activity. Overall, converted REITs realize positive excess re-turns. We find that lower (higher) M&A activity pre-conversion translates into superior absolute (risk-adjusted) post-conversion performance, which illustrates the benefits from such strategic company realignments.

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