Can bank lines of credit protect REITs against a credit crisis?
In a tight credit market, the primary concern of most real estate investment trusts (REITs) is the ability to access capital and maintain adequate liquidity.Bank lines of credit or loan commitments, which are legally binding contracts arranged to provide debt at the call of the borrowers under presp...
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| Format: | Article |
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American Real Estate and Urban Economics Association
2011
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| author | Ooi, Joseph T. L. Wong, Woei Chyuan Ong, Seow-Eng |
| author_facet | Ooi, Joseph T. L. Wong, Woei Chyuan Ong, Seow-Eng |
| author_sort | Ooi, Joseph T. L. |
| collection | UUM |
| description | In a tight credit market, the primary concern of most real estate investment trusts (REITs) is the ability to access capital and maintain adequate liquidity.Bank lines of credit or loan commitments, which are legally binding contracts arranged to provide debt at the call of the borrowers under prespecified terms, have been theorized to provide insurance protection against a credit crisis.This article examines whether bank lines of credit can indeed provide some insurance for REITs and allow them to access credit during bad times. Covering three credit crunch events, both the origination and utilization patterns of commitment loans by 275 REITs publicly traded between 1992 and 2007 are analyzed.We find that bank lines of credit insulated REITs from credit rationing at both the broad market level as well as at the firm level. However, the insurance value is qualified in the case of smaller and risky firms which may not get to extend their credit limit or draw down on their existing credit lines in a credit crisis. |
| first_indexed | 2024-07-04T05:58:41Z |
| format | Article |
| id | uum-15429 |
| institution | Universiti Utara Malaysia |
| last_indexed | 2024-07-04T05:58:41Z |
| publishDate | 2011 |
| publisher | American Real Estate and Urban Economics Association |
| record_format | eprints |
| spelling | uum-154292016-04-24T07:03:35Z https://repo.uum.edu.my/id/eprint/15429/ Can bank lines of credit protect REITs against a credit crisis? Ooi, Joseph T. L. Wong, Woei Chyuan Ong, Seow-Eng HF5601 Accounting In a tight credit market, the primary concern of most real estate investment trusts (REITs) is the ability to access capital and maintain adequate liquidity.Bank lines of credit or loan commitments, which are legally binding contracts arranged to provide debt at the call of the borrowers under prespecified terms, have been theorized to provide insurance protection against a credit crisis.This article examines whether bank lines of credit can indeed provide some insurance for REITs and allow them to access credit during bad times. Covering three credit crunch events, both the origination and utilization patterns of commitment loans by 275 REITs publicly traded between 1992 and 2007 are analyzed.We find that bank lines of credit insulated REITs from credit rationing at both the broad market level as well as at the firm level. However, the insurance value is qualified in the case of smaller and risky firms which may not get to extend their credit limit or draw down on their existing credit lines in a credit crisis. American Real Estate and Urban Economics Association 2011 Article PeerReviewed Ooi, Joseph T. L. and Wong, Woei Chyuan and Ong, Seow-Eng (2011) Can bank lines of credit protect REITs against a credit crisis? Real Estate Economics, 40 (2). pp. 285-316. ISSN 1080-8620 http://doi.org/10.1111/j.1540-6229.2011.00318.x doi:10.1111/j.1540-6229.2011.00318.x doi:10.1111/j.1540-6229.2011.00318.x |
| spellingShingle | HF5601 Accounting Ooi, Joseph T. L. Wong, Woei Chyuan Ong, Seow-Eng Can bank lines of credit protect REITs against a credit crisis? |
| title | Can bank lines of credit protect REITs against a credit crisis? |
| title_full | Can bank lines of credit protect REITs against a credit crisis? |
| title_fullStr | Can bank lines of credit protect REITs against a credit crisis? |
| title_full_unstemmed | Can bank lines of credit protect REITs against a credit crisis? |
| title_short | Can bank lines of credit protect REITs against a credit crisis? |
| title_sort | can bank lines of credit protect reits against a credit crisis |
| topic | HF5601 Accounting |
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