REIT line of credit pricing & the backyard effect : is the grass really greener?

For many reasons outlined in this thesis, line of credit facilities have become an integral part of a REITs capital structure. During this evolution, a possible pricing discrepancy for REIT lines of credit has emerged whereby certain REITs appear to obtain advantageous pricing (as indicated by LIBOR spread) on their lines of credit based on the location of their headquarters or the geographic focus of their operations. We have defined the potential existence of this phenomenon as the "Backyard Effect". While there are several possible explanations for the existence of such an occurrence, it nonetheless represents a potential market effect that impacts REIT line of credit costs. Through this thesis, we present market evidence supported by rigorous data and statistical analysis to conclude that the Backyard Effect is apparently present in the market for REIT lines of credit. In addition, we present the following line of credit market background and information: a historical perspective regarding the evolution of REITs and the LOC market, including current and past trends; basic contractual elements and terms as to how these LOC facilities function; and a discussion as to why REITs utilize LOCs and what are the main advantages and disadvantages of this form of financing. We hope that through this thesis, the reader is provided with a much greater awareness and understanding of the market for REIT lines of credit. Further, and most importantly, by identifying and providing statistical evidence of the existence of a possible pricing effect in the market for REIT lines of credit, we hopefully uncover an issue that will be of value to the multiple market participants.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Urban Studies and Planning.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2001

Authors dc:creator

• Watkins, Adrian L. (Adrian Leslie), 1970-
• Dobbins, William D. 1971-

Advisor dc:contributor.advisor

• Timothy Riddiough.

• Urban Studies and Planning.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8345

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8345