Economics at your fingertips  

Financing Decisions of REITs and the Switching Effect

Lucia Gibilaro () and Gianluca Mattarocci ()
Additional contact information
Lucia Gibilaro: University of Bergamo
Gianluca Mattarocci: University of Rome

International Real Estate Review, 2018, vol. 21, issue 3, 367-396

Abstract: Real estate investment trusts (REITs) frequently collect new financial resources by issuing new shares and bonds or requesting for new loans to finance their investment policy. Due to the low transparency of the market, the success and the cost of financing are significantly affected by the reputation and the guarantee offered by the syndicated consortium. International evidence suggests that the decision to change syndicated banks could impact the success of raising new capital for industrial and financial firms, but there is no concrete evidence which suggests that this is the case in the real estate industry. The paper considers a representative sample of US REITs to examine the frequency of switching decisions in the industry and their relationship with leverage policy. The empirical analysis demonstrates a greater likelihood of creating a new financing consortium when a REIT is poorly performing and the average interest rate is increasing. Moreover, the switching strategy is more frequently adopted when the REIT is planning to increase leverage and the current level of leverage is still far from the target value. Results obtained are robust with respect to the new consortium definition and the initial public offering (IPO) effect.

Keywords: REITs; Syndicated Consortium; Financing Decisions; Relationship Lending; Target Leverage (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA

Access Statistics for this article

International Real Estate Review is currently edited by Professor Ko Wang, Professor Hongyu Liu and Professor Rose Neng Lai

More articles in International Real Estate Review from Asian Real Estate Society Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA.
Bibliographic data for series maintained by IRER Secretary Office/Webmaster ().

Page updated 2018-12-01
Handle: RePEc:ire:issued:v:21:n:03:2018:p:367-396