Real Estate Securitization and the Debt Maturity Structure: Evidence from J-REITs

This paper investigates the relationship between the degree of real estate asset liquidity and liability structure of J-REITs. By employing data of ragionality and usage as new proxies of real estate asset liquidation value, we empirically derived the following implications. First, J-REITs with high ratios of real estate investment assets in a high liquid region, i.e., where the trade frequency per unit area is high, have high debt to equity ratio and long term debt maturity. Second, J-REITs with high concentration ratios of real estate assets traded in small units as the use of residential properties also have high debt to equity ratio and long term debt maturity. In addition, the above relationships are enhanced when the REIT ownership structure is concentrated. In summary, the regional characteristics and type of usage of real estate assets are validated as asset liquidation proxies and they are related to the liability structure of J-REITs. The existence of a block shareholder is regarded as a sponsor firm by market participants and this possibly enhances the above relationship.