Tenant Quality and REIT Liquidity Management

Tenant Quality and REIT Liquidity Management Property values depend upon quality tenants and consistency (Smith: The RMA Journal 50-60, 2009). REIT firms are only as strong as their properties. In this research I examine how tenant quality affects REIT firm liquidity management (i.e. cash holdings and utilization of line of credit). I find that 1) tenant Altman Z-score and size are inversely related to total liquidity (cash plus unused credit line) and unused credit lines of REIT firms; 2) tenant size is inversely related to the total corporate liquidity and unused credit lines of REIT firms, but has no affect on REIT cash holdings; 3) tenant credit ratings are negatively related to total credit available and unused credit lines; 4) tenant book-to-market ratio and tenant profitability are negatively related to REIT cash holdings, but positively correlated to the total available credit lines and unused credit lines of REIT firms; 5) these effects vary across different property types. These results suggest that the analysis of tenant quality can offer insights into the firm policy and decision makings of REIT firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Tenant Quality and REIT Liquidity Management

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Publisher
Springer Journals
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-016-9575-y
Publisher site
See Article on Publisher Site

Abstract

Property values depend upon quality tenants and consistency (Smith: The RMA Journal 50-60, 2009). REIT firms are only as strong as their properties. In this research I examine how tenant quality affects REIT firm liquidity management (i.e. cash holdings and utilization of line of credit). I find that 1) tenant Altman Z-score and size are inversely related to total liquidity (cash plus unused credit line) and unused credit lines of REIT firms; 2) tenant size is inversely related to the total corporate liquidity and unused credit lines of REIT firms, but has no affect on REIT cash holdings; 3) tenant credit ratings are negatively related to total credit available and unused credit lines; 4) tenant book-to-market ratio and tenant profitability are negatively related to REIT cash holdings, but positively correlated to the total available credit lines and unused credit lines of REIT firms; 5) these effects vary across different property types. These results suggest that the analysis of tenant quality can offer insights into the firm policy and decision makings of REIT firms.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Sep 3, 2016

References

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