Date of Completion


Degree Type

Honors Thesis - Campus Access


Finance (FNCE)

First Advisor

Trevor Zink, Ph.D.

Second Advisor

Thomas Herndon, Ph.D.


Leveraging decisions have been a source of both intrigue and mystery in the REIT industry and substantial work has been done to clarify the relationship between leverage and returns. This study seeks to build on this greater body of research and specifically on research that indicates the possible existence of an optimal level of REIT leveraging that maximizes return on assets (ROA). This work illuminates the historical relationship between leveraging decisions and returns by examining equity REIT performance, stratified by asset class using financial data over the last half-century and finds evidence of optimal leveraging points. Furthermore, this study finds that optimal leverage is highly variable depending on the asset type of a REITs’ primary holdings and its size. Notable among these results is duplicity of optimal leverage in diversified REITs, similarities of office and health care REITs that lever most effectively at the lowest levels, and the discovery of a disparate optimal leverage relationship between retail REITs of different sizes. Taken together, these results inform scholarly understandings of the REIT market and inform practical REIT management decisions about the leverage/return relationship holistically and by asset class.