On the Capital Structure of Real Estate Firms

Alcock, Jamie; Steiner, Eva; Tan, Kelvin Jui Keng

doi:10.2139/ssrn.1664071

On the Capital Structure of Real Estate Firms

23rd Australasian Finance and Banking Conference 2010 Paper

32 Pages Posted: 23 Aug 2010 Last revised: 5 Apr 2011

See all articles by Jamie Alcock

Jamie Alcock

The University of Sydney Business School; Centre for International Finance and Regulation (CIFR)

Eva Steiner

School of Hotel Administration, Cornell University

Kelvin Jui Keng Tan

University of Queensland - Business School; Financial Research Network (FIRN)

Date Written: August 24, 2010

Abstract

The leverage and debt maturity choices of real estate companies are interdependent, and are not made separately as is often assumed in the literature. We use three-stage least squares (3SLS) regression analysis to explore this interdependence for a sample of listed U.S. real estate companies and Real Estate Investment Trusts (REITs) traded between 1973 and 2006. We find substantial differences in the nature of the relationship between leverage and maturity for the two firm types. Leverage is a determinant of maturity for non-REITs, whereas maturity is a determinant of leverage for REITs. We also find that the drivers of capital structure choices in real estate companies and REITs clearly reflect the effects of the REIT regulation.

Keywords: Capital Structure, Leverage, Maturity, Real Estate Firms

Suggested Citation: Suggested Citation

Alcock, Jamie and Steiner, Eva Maria and Tan, Kelvin Jui Keng, On the Capital Structure of Real Estate Firms (August 24, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1664071 or http://dx.doi.org/10.2139/ssrn.1664071