Shareholders' Wealth and Organizational Restructuring: Are Real Estate Master Limited Partnerships Different?

Corporate real estate assets have long been thought to be undervalued by firm managers. Finance research has provided evidence that if assets are separated from the firm for financing purposes, revaluation occurs and parent firms experience a positive share price response. This study compares the parent share price reaction when real estate master limited partnerships (MLPs) are created with the parent share price impact when non-real estate MLPs are formed. The study provides evidence that parent firms creating non-real estate MLPs experience a positive, sustained increase in wealth while firms forming real estate MLPs experience no significant wealth impact.