The Importance of Location in the Financing of Property Acquisitions by REITs

29 Pages Posted: 4 Mar 2016

See all articles by James Conklin

James Conklin

University of Georgia

Moussa Diop

University of Southern California

Mingming Qiu

Michigan State University - Department of Finance

Date Written: March 2, 2016

Abstract

We explore the role of location in the financing of commercial real estate acquisitions by real estate investment trusts (REITs). More specifically, we examine how the location of a property relative to a REIT's main business location affects the financing of that property. We find that REITs are less likely to use mortgage for investments located within the same state as the firm's headquarters. This result is robust and statistically significant after we control for other potential reasons for mortgage financing and year fixed effects. Further, within those transactions that involve mortgages, REITs are as likely to use CMBS financing irrespective of property location, evidencing the widespread availability of conduit lenders.

Keywords: Commercial property acquisitions, REITs, Location, Financing Structure

JEL Classification: G21, G31,G32, R3

Suggested Citation

Conklin, James and Diop, Moussa and Qiu, Mingming, The Importance of Location in the Financing of Property Acquisitions by REITs (March 2, 2016). Available at SSRN: https://ssrn.com/abstract=2741222 or http://dx.doi.org/10.2139/ssrn.2741222

James Conklin

University of Georgia ( email )

Athens, GA 30602-6254
United States

Moussa Diop

University of Southern California ( email )

Sol Price School of Public Policy
RGL 315
Los Angeles, CA 90089
United States
(213)821-0467 (Phone)

Mingming Qiu (Contact Author)

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States
5178842995 (Phone)

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