REITs as Captive-Financing Affiliates: Impact on Financial Performance

Abstract

Some real estate investment trusts are created as “captive-financing” affiliates by their sponsors. This creates conflicts of interest between the sponsor/manager and shareholders. Such conflicts could affect the financial performance of the firm. Using data on a sample of REITs, results show that captive-financing REITs' financial performance is on average inferior to that of non-captive REITs.