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The Wealth Effects of Sale and Leasebacks: New Evidence

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  • Lynn M. Fisher

Abstract

This paper investigates the phenomenon of sale and leasebacks as one way in which firms may use financial contracts to rearrange their organizational architecture. A theoretic model links the length of initial leaseback period to incentives to make noncontractible future investments in the lease relationship and predicts that firms choose shorter leases when landlords make relatively important investments. Using a sample of 71 sale and leaseback events from the 1990s, we document a significant mean abnormal return of 1.3% for shareholders of seller/lessee firms announcing relatively short leasebacks. The evidence suggests that firms may use sale and leasebacks to optimize their claims to real estate.

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  • Lynn M. Fisher, 2004. "The Wealth Effects of Sale and Leasebacks: New Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(4), pages 619-643, December.
    • Handle: RePEc:bla:reesec:v:32:y:2004:i:4:p:619-643
    DOI: 10.1111/j.1080-8620.2004.00105.x
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    Cited by:

    1. S. Akin & Val Lambson & Grant McQueen & Brennan Platt & Barrett Slade & Justin Wood, 2013. "Rushing to Overpay: Modeling and Measuring the REIT Premium," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 506-537, October.
    2. Tomi Grönlund & Antti Louko & Mika Vaihekoski, 2008. "Corporate Real Estate Sale and Leaseback Effect: Empirical Evidence from Europe," European Financial Management, European Financial Management Association, vol. 14(4), pages 820-843, September.
    3. Noriko Ashiya, 2015. "Determinants of Potential Seller/Lessee Benefits in Sale¡VLeaseback Transactions," International Real Estate Review, Global Social Science Institute, vol. 18(1), pages 89-112.
    4. Julan Du & Charles Ka Yui Leung & Derek Chu, 2014. "Return Enhancing, Cash-rich or simply Empire-Building? An Empirical Investigation of Corporate Real Estate Holdings," International Real Estate Review, Global Social Science Institute, vol. 17(3), pages 301-357.
    5. Longinidis, Pantelis & Georgiadis, Michael C., 2014. "Integration of sale and leaseback in the optimal design of supply chain networks," Omega, Elsevier, vol. 47(C), pages 73-89.
    6. David Ling & Andy Naranjo & Michael Ryngaert, 2012. "Real Estate Ownership, Leasing Intensity, and Value: Do Stock Returns Reflect a Firm’s Real Estate Holdings?," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 184-202, January.
    7. Jacques Sarremejeanne, 2011. "Les déterminants financiers des cessions-bail," Post-Print hal-00650571, HAL.
    8. Fayez A. Elayan & Thomas O. Meyer & Jingyu Li, 2006. "Evidence from Tax-Exempt Firms on Motives for Participating in Sale-Leaseback Agreements," Journal of Real Estate Research, American Real Estate Society, vol. 28(4), pages 381-410.
    9. Elizabeth Devos & Erik Devos & He Li & Desmond Tsang, 2022. "Operating Lease as Alternative Financing for REITs: a Viable Strategy or a Sign of Trouble?," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 153-180, August.

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