Abstract
Using a large sample of commercial property acquisitions by real estate investment trusts (REITs), we show that property investment characteristics affect financing. Specifically, REITs are 4-8% less likely to use secured (mortgage) debt when investing in core market properties. The evidence points to a demand-side explanation for the relation between investment characteristics (core vs. non-core) and project financing. Moreover, our analysis provides support for the hypothesis that firms avoid mortgage financing in core markets to preserve operational flexibility in these markets.
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