The Leveraged City
This study analyzes the effects of leverage on real estate developments. In urban growth models, a real estate developer converts land from agricultural to urban use. At the time at which such a land conversion occurs, a developer who maximizes the equity value obtains a defaultable construction loa...
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| Veröffentlicht in: | Real estate economics 2014-12, Vol.42 (4), p.1042-1066 |
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| container_end_page | 1066 |
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| container_issue | 4 |
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| container_title | Real estate economics |
| container_volume | 42 |
| creator | You, Seung Dong |
| description | This study analyzes the effects of leverage on real estate developments. In urban growth models, a real estate developer converts land from agricultural to urban use. At the time at which such a land conversion occurs, a developer who maximizes the equity value obtains a defaultable construction loan at fair market value. By presenting a more general form of the irreversibility premium of Capozza and Helsley, I show that, with more leverage, uncertainty is less of a deterrent to the land conversion. Under uncertainty, a leveraged developer exercises the land conversion option earlier than an unleveraged developer would. Leverage expands equilibrium city size. |
| doi_str_mv | 10.1111/1540-6229.12058 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 1080-8620 |
| ispartof | Real estate economics, 2014-12, Vol.42 (4), p.1042-1066 |
| issn | 1080-8620 1540-6229 |
| language | eng |
| recordid | cdi_proquest_journals_1634178103 |
| source | Wiley Online Library - AutoHoldings Journals; EBSCOhost Business Source Complete |
| subjects | Cities Fair market value Growth models Land use Leverage Real estate developments Studies |
| title | The Leveraged City |
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