Evidence from Tax-Exempt Firms on Motives for Participating in Sale-Leaseback Agreements

Fayez A. Elayan, Thomas O. Meyer () and Jingyu Li
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Fayez A. Elayan: Dept. of Accounting, Brock University
Thomas O. Meyer: Dept. of Marketing & Finance, Southeastern Louisiana University, SLU 10844, Hammond, LA 70402
Jingyu Li: Dept. of Accounting, Brock University

Journal of Real Estate Research, 2006, vol. 28, issue 4, pages 381-410

Abstract: Previous research finds evidence that tax factors motivate the participants in leasing transactions. Tax-arbitrage arguments predict that leasing participants gain when the lessor’s tax rate exceeds that of the lessee. The research employs a sample of effectively tax-exempt REIT lessors to explore alternative leasing motives. Changes in REIT qualification rules are examined to develop an Agency-Cost, and competing Income-Retention Hypothesis for lessors. The rules and changes suggest that REIT management has the incentive, motive and opportunity to make real-estate investments quickly. The evidence developed is consistent with agency-costs arising from the possibility that they may overpay for properties.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2006
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