Equity Participation: A Theoretical Analysis

John McDonald

Journal of Real Estate Portfolio Management, 2012, vol. 18, issue 3, 247-255

Abstract: This is a theoretical examination of equity participation loans in commercial real estate. The model combines the standard capital asset pricing model (CAPM) with the method developed by Hamada (1969) to demonstrate the Modigliani-Miller (1958) propositions regarding financial leverage and firm value. The results include the following: equity participation has no effect on the borrower's reservation value of the investment, and the expected rate of return to the borrower's equity with equity participation equals the expected rate of return to equity with no equity participation minus the extent of equity participation times the risk premium attached to the investment with no equity participation.

Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.2012.12089931 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:taf:repmxx:v:18:y:2012:i:3:p:247-255

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/repm20

DOI: 10.1080/10835547.2012.12089931

Access Statistics for this article

Journal of Real Estate Portfolio Management is currently edited by Peng Liu and Vivek Sah

More articles in Journal of Real Estate Portfolio Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().