Author: Richard A. Graff

Start Page: 449
End Page: 468
Volume: 7
Issue Number: 4
Year: 1992
Publication: Journal of Real Estate Research

Abstract: The separation of commercial real estate into structured investment products as suggested by the debt-and-equity model can enhance property value due to positive net changes in agency costs and tax shields. In many cases this enhancement should be large enough to induce real estate owners to make property available for component separation. The resulting income component has the investment characteristics of a tax-sheltered corporate bond, and should be sold to taxable investors to realize the value enhancement.