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Paper eres2013_203:
Capital Structure Research for REITs and REOCs

id eres2013_203
authors Hohenstatt, Ralf; Bertram Steininger
year 2013
title Capital Structure Research for REITs and REOCs
source Book of Proceedings of 20th Annual European Real Estate Society Conference in Vienna, Austria (ISBN: 978-3-85437-323-0), pp. 165-188
summary This paper presents a dynamic multi-equation model based on a balance sheet identity, where technical aspects of capital structure are highlighted through separately observing debt and equity and their relationship to investment. Additionally, leverage dynamics are interpreted in their role for liquidity management. Interactions of leverage with lines of credit (LOC) and cash are considered in the light of financial flexibility. The major findings obtained by observing US REITs and REOCs from 1995 to 2010 are as follows. In accordance with the existing literature, cash and LOC reveal a substitute relationship. However, the calculus of financial flexibility and our findings suggest that leverage positively drives cash, which is consistent with Gamba and Triantis (2008), and also with the accepted perspective of debt minus cash being net debt (Spotlight A). Consequently, the very robust results indicate that leverage eliminates a significant amount of information. Further mechanical relationships, especially for market leverage, are suggested (Spotlight B).
keywords Capital structure, Real estate investment trust, Real estate operating company, Financial flexibility, Leverage ratio
series ERES:conference
type paper session
discussion No discussions. Post discussion ...
session O-5: Real Estate Finance & Investment
last changed 2014/10/21 21:51
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