Evidence from Tax-Exempt Firms on Motives for Participating in Sale-Leaseback Agreements

30 Pages Posted: 13 Dec 2006

See all articles by Fayez A. Elayan

Fayez A. Elayan

Brock University-Goodman School of Business

Thomas O. Meyer

Southeastern Louisiana University - Department of Marketing and Finance

Jennifer Li

Brock University

Abstract

Previous research finds evidence that tax factors motivate the participants in leasing transactions. Tax-arbitrage arguments predict that leasing participants gain when the lessor's tax rate exceeds that of the lessee. This research employs a sample of effectively tax-exempt Real Estate Investment Trust (REIT) lessors to explore alternative leasing motives. Changes in REIT qualification rules are examined to develop an Agency-Cost and competing Income-Retention Hypothesis for lessors. The rules and changes suggest that REIT management has the incentive, motive, and opportunity to make real estate investments quickly. The evidence developed is consistent with agency costs arising from the possibility that they may overpay for properties.

Keywords: tax-exempt, sale-leaseback, leasing, REIT

JEL Classification: D21, G21, G28, G32, H25, K23, L85, O16

Suggested Citation

Elayan, Fayez A. and Meyer, Thomas Otto and Li, Jingyu, Evidence from Tax-Exempt Firms on Motives for Participating in Sale-Leaseback Agreements. Journal of Real Estate Research, Vol. 28, No. 4, 2006, Available at SSRN: https://ssrn.com/abstract=951281

Fayez A. Elayan (Contact Author)

Brock University-Goodman School of Business ( email )

1812 Sir Issac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 (Phone)
905-688-9779 (Fax)

HOME PAGE: http://www.brocku.ca

Thomas Otto Meyer

Southeastern Louisiana University - Department of Marketing and Finance ( email )

SLU 10844
Hammond, LA 70402
United States
985-549-3103 (Phone)
985-549-5010 (Fax)

Jingyu Li

Brock University ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

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