Joint Leverage and Maturity Choices in Real Estate Firms: The Role of the REIT Status

Posted: 3 Dec 2013 Last revised: 10 Oct 2014

See all articles by Jamie Alcock

Jamie Alcock

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

Eva Steiner

Cornell SC Johnson College of Business

Kelvin Jui Keng Tan

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

Date Written: December 2, 2013

Abstract

We explore the interdependence of leverage and debt maturity choices in Real Estate Investment Trusts (REITs) and unregulated listed real estate investment companies in the U.S. for the period 1973-2011. We find that the leverage and maturity choices of all listed real estate firms are interdependent, but in contrast to industrial firms, they are not made simultaneously. Across the different types of real estate firms considered, we find substantial differences in the nature of the relationship between leverage and maturity. Leverage determines maturity in non-REITs, whereas maturity is a determinants of leverage in REITs. We suggest that the observed differences reflect the effects of the REIT regulation, rather than solely being a function of real estate as the underlying asset class. We also present novel evidence that the relationship between leverage and maturity in both firm types can be used to moderate the effects of other exogenous financing policies.

Keywords: Leverage; Debt maturity; Capital structure

JEL Classification: G32, G01

Suggested Citation

Alcock, Jamie and Steiner, Eva Maria and Tan, Kelvin Jui Keng, Joint Leverage and Maturity Choices in Real Estate Firms: The Role of the REIT Status (December 2, 2013). Journal of Real Estate Finance and Economics, 2014, 48(1), 57-78. Available at SSRN: https://ssrn.com/abstract=2362484

Jamie Alcock (Contact Author)

The University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Eva Maria Steiner

Cornell SC Johnson College of Business ( email )

465B Statler Hall
Ithaca, NY 14853
United States

HOME PAGE: http://https://sha.cornell.edu/faculty-research/faculty/ems457/

Kelvin Jui Keng Tan

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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