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Financing Choice and Liability Structure of Real Estate Investment Trusts
Author(s) -
Brown David T.,
Riddiough Timothy J.
Publication year - 2003
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00068
Subject(s) - capital structure , debt , leverage (statistics) , business , real estate investment trust , finance , liability , equity value , financial system , equity (law) , real estate , internal debt , recourse debt , gearing ratio , debt levels and flows , monetary economics , economics , machine learning , computer science , political science , law
We conduct an analysis of public financial offerings of equity Real Estate Investment Trusts (REITs), with a focus on liability structure effects and whether or not firms target longer‐run debt ratios. Our major findings are that (1) proceeds from equity offers are more likely to fund investment, whereas public debt offer proceeds are typically used to reconfigure the liability structure of the firm; (2) public debt issuers are often capital constrained and target total leverage ratios to retain an investment grade credit rating; and (3) the preoffer liability structure affects the issuance choice decision, in that firms with higher preoffer levels of secured (unsecured) debt tend to issue equity (public debt). Other notable findings are that the market for public REIT debt is integrated with the broader debt markets and that higher credit quality firms issue longer‐maturing bonds.