Authors: Frederick Pretorius, Anthony Walker and K. W. Chau

Start Page: 1
End Page: 34
Volume:11
Issue Number: 01
Year: 2003
Publication: Journal of Real Estate Literature

   
Abstract: This study reviews commercial real estate leases as one transaction form to finance
corporate capital assets. Credit risk is common to leases and debt as substitute transactions; but the two credit forms generate different transaction costs and agency conflicts, and thus differential pricing. Causal relationships resulting in explicit options in leases reflect complex agency considerations, which complicate the application of current option pricing principles to value the options. In general, it seems as if lease pricing phenomena are poorly researched. This article aims to identify where more narrowly demarcated research could assist in unraveling lease pricing behavior.