Banking Relationships and Financial Decisions of REITs
32 Pages Posted: 18 Feb 2021 Last revised: 12 Jul 2021
Date Written: December 31, 2020
Banking relationships are key factors influencing financing decisions of real estate investment trusts (REITs) that are mandated to hold highly specific assets. Using a comprehensive data set of loan facilities by REITs across different markets, this paper empirically tests the effect of REIT-bank relationships on credit costs and other non-price credit terms. We find that REITs with past banking relationships enjoy favourable loan terms that include lower loan rates, higher loan amount, and a less stringent collateral requirement. These favorable terms were kept by relationship banks during the Global Financial Crisis from 2007 to 2009.
Keywords: Bank Lending Relationship, REITs, Cross-country
JEL Classification: D82,G30, G20, G21, G24, L14, N20
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