Shopping Center Investments under Tenant Incentive Contracting

Peter Liu

ERES from European Real Estate Society (ERES)

Abstract: Investment decisions made under uncertain conditions are among the most critical considerations for corporations. The significance of financial constraints in a firm's investment choices has been emphasized by the recent financial crisis. In this study, we focus on modeling a typical shopping center that includes both anchor tenants and in-line or mall tenants. To ensure alignment of interests with the tenants, the center owner usually employs a percentage lease contract. However, in-line tenants necessitate a co-tenancy clause that stipulates the payment of no rent if the anchor departs from the center. Our model is calibrated using a sample of shopping center leases.

Keywords: co-tenancy; financial constraints; Investment Under Uncertainty; retail leases (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2023_296

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