Throwing Good Money After Bad? Cash Infusions and Distressed Real Estate
作者:
Bradford Cornell,
Francis A. Longstaff,
Eduardo S. Schwartz,
期刊:
Real Estate Economics
(WILEY Available online 1996)
卷期:
Volume 24,
issue 1
页码: 23-41
ISSN:1080-8620
年代: 1996
DOI:10.1111/1540-6229.00678
出版商: Blackwell Publishing Ltd
数据来源: WILEY
摘要:
When a leveraged real estate project experience cash‐flow problems, the owner must either inject additional cash or default on the mortgage. We show that it is not optimal for the owner to default as soon as net cash flow becomes negative. Surprisingly, the owner can expropriate some of the mortgage lender's wealth by injecting cash and continuing to pay interest. When the owner has cash constraints, outside investors may be able to extract significant economic rents by financing distressed real estate projects. These results have interesting implications for mortgage lending and the pattern of real estate transaction volum
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