Joint Leverage and Maturity Choices in Real Estate Firms: The Role of the REIT Status
Posted: 3 Dec 2013 Last revised: 10 Oct 2014
Date Written: December 2, 2013
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: Suggested Citation