Leasing Versus Purchase of Corporate Real Property: Leases with Residual Equity Interests
This article reports the informal research findings from personal interviews with more than thirty corporate real estate executives in regard to leasing corporate operating space while retaining an equity interest in the residual value of the leased property. There appears to be general agreement among "excellent" corporate real estate executives that occupancy costs can often be reduced through leases with equity interests below what is generally possible with either (1) a straight lease of space or (2) an outright purchase (i.e., borrow to buy). Four reasons discussed with corporate real estate executives for the increasing use of leases with residual equity interests are reviewed. Finally, theoretical support is suggested for why such leases, rather than being just the outgrowth of the current corporate space glut, may actually reflect a long-term trend in the way large companies "finance" operating space needs.
Volume (Year): 6 (1991)
Issue (Month): 1 ()
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- Myers, Stewart C & Dill, David A & Bautista, Alberto J, 1976. "Valuation of Financial Lease Contracts," Journal of Finance, American Finance Association, vol. 31(3), pages 799-819, June.
- Long, Michael S., 1977. "Leasing and the Cost of Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 579-586, November.
- Lewellen, Wilbur G & Long, Michael S & McConnell, John J, 1976. "Asset Leasing in Competitive Capital Markets," Journal of Finance, American Finance Association, vol. 31(3), pages 787-798, June.
- Johnson, Robert W & Lewellen, Wilbur G, 1972. "Analysis of the Lease-or-Buy Decision," Journal of Finance, American Finance Association, vol. 27(4), pages 815-823, September.
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