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Article
Publication date: 1 August 2006

Yai‐Hung Chiang and Chun‐Kei Joinkey

The first Hong Kong Real Estate Investment Trust (HK‐REIT), the Link REIT, was successfully launched in late 2005. The retail tranche of its initial public offering…

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428

Abstract

The first Hong Kong Real Estate Investment Trust (HK‐REIT), the Link REIT, was successfully launched in late 2005. The retail tranche of its initial public offering (IPO) was 19 times oversubscribed, and the IPO is the largest of its kind in the world until now. Despite the initial phenomenon success, there have been only three others to follow and get listed. Indeed, it took Hong Kong over two years to have her first Link REIT listed after the legislation for REIT products had come into force. The development of REIT market in Hong Kong has been slow compared to its counterparts in some other Asian countries. This paper aims to explain the somewhat sluggish growth of the HK‐REIT market. Its development is compared with some emerging Asian markets as well as the more mature markets in the USA and Australia. The study is focused on the legislations that govern REITs in different jurisdictions, their different REIT market envi‐ronments and the rationale from the respective governments to introduce their REITs. It is concluded that the sluggish development of HK‐REITs is mainly due to its market environment and industry structure. There is not enough incentive for developers to dispose their assets in the form of REITs. Besides, the HK‐REIT Code was initially criticized by the industry as being too restrictive. Though subsequent amendments on the HK‐REIT Code have been made to make it more conducive to the development of REIT market, further sustainable success will however hinge on the willingness from sponsors, particularly large developers, to offer their portfolios of properties for sale through REITs.

Details

Journal of Financial Management of Property and Construction, vol. 11 no. 2
Type: Research Article
ISSN: 1366-4387

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Article
Publication date: 6 November 2007

Deqing Diane Li and Kenneth Yung

The purpose of this paper is twofold in examining the international transmission of REIT returns volatility. The first purpose is to add to the literature on whether the…

Abstract

Purpose

The purpose of this paper is twofold in examining the international transmission of REIT returns volatility. The first purpose is to add to the literature on whether the real estate securities market and the broader equity market are integrated. The second objective of the study is to determine whether geographic risk factors can be transmitted beyond their region of influence.

Design/methodology/approach

The study uses the GARCH(1, 1), EGARCH, and GARCH‐M models.

Findings

The results show that there are significant international spillovers of REIT returns volatility within the Pacific region. The results also show that there are significant volatility transmissions between the Pacific and the Atlantic regions.

Practical implications

The results are consistent with the implication that the real estate sector and the general equity market are integrated such that geographic risk can be transmitted across national borders. The result will have major implications for international investment strategies.

Originality/value

To date, there has been no published study on the international transmission of REIT returns volatility. This study therefore examines whether the conditional variance of REIT returns of a country is affected by volatility transmission across markets in the same region using four Pacific markets.

Details

Review of Accounting and Finance, vol. 6 no. 4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 25 April 2008

Michael C.H. Quek and Seow Eng Ong

There is currently no real estate investment trust (REIT) listed in China. As of date, only two REITs – GZI REIT of Hong Kong and CapitaRetail China Trust (CRCT) of…

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3315

Abstract

Purpose

There is currently no real estate investment trust (REIT) listed in China. As of date, only two REITs – GZI REIT of Hong Kong and CapitaRetail China Trust (CRCT) of Singapore – have securitised Chinese property assets. The purpose of this paper is to examine the driving forces and the obstacles surrounding China REITs, and evaluate REIT securitisation as an exit strategy for Chinese properties.

Design/methodology/approach

The paper analyses the performance of the two cross‐border REITs and investigates whether REITs holding Chinese assets outperform other listed REITs.

Research limitations/implications

CRCT outperforms GZI REIT as well as some of the other Singapore REITs, while GZI REIT ranked second lowest in terms of price performance when compared to other Hong Kong REITs. The limited history of CRCT suggests that when a well‐structured REIT holding Chinese assets can perform very well. We also infer that performance is closely linked to portfolio composition and diversification, growth story and originator reputation.

Originality/value

The study shows that there is indeed a strong local demand for China REITs, and that REITs can provide an alternative source of real estate financing for Chinese developers and promote a better regulated Chinese real estate market.

Details

Journal of Property Investment & Finance, vol. 26 no. 3
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 3 August 2012

Jing Liu, Geoffrey Loudon and George Milunovich

The purpose of this paper is to study correlations between the national real estate investment trusts (REIT) markets in the USA and the four Asia‐Pacific countries of…

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1355

Abstract

Purpose

The purpose of this paper is to study correlations between the national real estate investment trusts (REIT) markets in the USA and the four Asia‐Pacific countries of Australia, Hong Kong, Japan and Singapore, and document the extent to which the time variation present in these correlations can be explained from a set of 11 economic and financial factors. Both US dollar and local currency returns are used.

Design/methodology/approach

Time‐varying correlations are estimated using a DCC‐GARCH model that allows for asymmetries in both the correlations and volatilities. The correlations are then regressed on a set of four economic and seven financial factors, and tests of statistical significance are conducted in order to discriminate between relevant and irrelevant explanatory variables. The authors estimate a fixed‐effects panel regression as well as individual regressions for each dynamic correlation.

Findings

Significant time variation is found in the four REIT correlation series. Panel regressions suggest that REIT correlations rise with increases in the interaction of national inflation rates and with higher global equity market uncertainty. It is also found that REIT correlations fall with increases in the US default risk premium and global equity market volume. Relaxing the structure imposed by the panel data model, individual regressions confirm most of the results, although there are some exceptions. It is also found that there are no substantial differences in the dynamics of the correlation coefficients when switching from the US dollar to local currency denominated returns.

Practical implications

Investors in real estate securities across national markets should take into account information about the credit spread, the volatility and volume of global equity markets, and inflation rates when modeling correlations. These variables may alert the investors to the possibility that, under a set of circumstances, investing in real estate across different markets may not provide the expected diversification benefits. Another implication relates to the impact of currency hedging. It appears that the impact of switching from US dollar to local currency denominated returns does not substantially change the time dynamics of the correlations, or the importance of explanatory variables.

Originality/value

Although considerable progress has been made in modelling time‐varying correlations between various REIT markets, to the authors' knowledge, this is one of the first papers to investigate the underlying causes of the co‐movement, especially between the US and Asia‐Pacific markets. The paper's results will help investors and risk managers make better choices by identifying those factors that have more systematic effects on the change in the REIT correlations, rather than more transient forces.

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Article
Publication date: 13 March 2007

E.C.M. Hui, C.Y. Yiu and Y. Yau

This paper seeks to explore the relationship between market positioning and rents of retail facilities in Hong Kong.

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3219

Abstract

Purpose

This paper seeks to explore the relationship between market positioning and rents of retail facilities in Hong Kong.

Design/methodology/approach

Regression analysis is deployed in the paper to find out the impact of various attributes, in terms of a retail facility's physical characteristics, market positions, and location, on the annualized per‐area net rental income. The sample data obtained from the initial public offerings of the Link real estate investment trust (REIT), one of the largest REITs in the world, is used for analysis.

Findings

The study finds that district centers command the highest average rental levels, followed by local and estate centers. As the effects of positive externalities for unorganized shops are smaller, the average rental levels for shops are generally lower. In terms of the impact of individual attributes on rents, a retail property's age and its efficiency ratio have negative relationships with rents, while its size (in terms of gross floor area) and the amount of shops positively affect the facility's rental levels.

Research limitations/implications

Although obtaining the largest possible dataset in the Link REIT portfolio for the study, the sample is not considered big enough to detect the impact of the location of a retail facility on its rental adjustments. Further studies are required with regard to this issue.

Originality/value

The results of this study give planners and developers of retail facilities some insights about the effects of market positioning on a retail facility's performance on the leasing market.

Details

Journal of Property Investment & Finance, vol. 25 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 February 2016

Wei Kang Loo, Melati Ahmad Anuar and Suresh Ramakrishnan

– The purpose of this paper is to examine the long-run relationship and short-term linkage between the Asian REIT markets and their respective macroeconomic variables.

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1365

Abstract

Purpose

The purpose of this paper is to examine the long-run relationship and short-term linkage between the Asian REIT markets and their respective macroeconomic variables.

Design/methodology/approach

The data collected comprised total return REIT Index from Japan, Hong Kong, Singapore, Malaysia, Thailand, Taiwan and South Korea and their macroeconomic variables from the date of availability of the data until December 2014. The macroeconomic variables are either available in monthly or quarterly basis, they will be separately tested with REIT Index respectively to their frequency. All the variables are tested for its stationarity prior to the investigation of their long-run relationship and short-term linkage using Johansen cointegration test and Granger causality test.

Findings

The results showed that certain of the emerging REIT markets show a higher degree of integration with macroeconomic variables in the long run. This implies that the emerging REIT markets are more sensitive towards the change in macroeconomic environment in relative to the developed REIT markets.

Practical implications

The paper implied that the distinction of each market structure and their unique way of policy implementation. The findings can assists policy makers to understand about the significance of policy implementation on the Asian REIT markets prior to decision making and also for the portfolio management my asset managers.

Originality/value

The paper is one of the few attempts at assessing the long-term relationship and short term linkage between the Asian REIT markets and the macroeconomic variables.

Details

Journal of Property Investment & Finance, vol. 34 no. 1
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 6 November 2009

Hiu Ting Sham, Tien Foo Sing and I‐Chun Tsai

The purpose of this study is to test whether real estate investment trusts (REITs) are able to reap positive economies of scale with an enlarged asset base, which are…

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1048

Abstract

Purpose

The purpose of this study is to test whether real estate investment trusts (REITs) are able to reap positive economies of scale with an enlarged asset base, which are translated into lower operating expenses, higher revenue, and better accessibility to capital at competitive costs. The paper aims to test economies of scale effects on expenses, revenue and equity return for REITs in Asia over a sample period from 2001 to 2007.

Design/methodology/approach

Three different functional models are used (translog, semi‐log quadratic and simple quadratic) to test the relations of asset size and squared asset size of REITs with expense variables.

Findings

The semi‐log quadratic models show significant positive economies of scale effects in all expenses categories except for property management fees after controlling for exogenous factors like country, year, diversification strategy and growth. The paper does not, however, find significant scale advantages in revenue, operating income and equity costs for larger Asian REITs.

Research limitations/implications

This paper acknowledges the limitations associated with small sample size, and possible inconsistency in the financial reporting of expenses and revenues data in the sample countries, which may cause some biases in the results. The findings imply that REIT asset managers should focus on asset growth strategies that are able to generate scale efficiency, so as to generate positive wealth effects for shareholders.

Originality/value

Past empirical research on scale economies focuses on US REITs. There are limited works done on the emerging Asia REIT markets. This study helps fill the gap by establishing whether there exists significant scale efficiency in operation and performance of Asian REITs.

Details

Journal of Financial Management of Property and Construction, vol. 14 no. 3
Type: Research Article
ISSN: 1366-4387

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Article
Publication date: 15 November 2019

Wei Kang Loo

The purpose of this paper is to determine if artificial neural network (ANN) works better than linear regression in predicting Hong Kong real estate investment trusts’ …

Abstract

Purpose

The purpose of this paper is to determine if artificial neural network (ANN) works better than linear regression in predicting Hong Kong real estate investment trusts’ (REITs) excess return.

Design/methodology/approach

Both ANN and the regression were applied in this study to forecast the Hong Kong REITs’ (HK-REITs) return using the capital asset pricing model and Fama and French’s three-factor models. Each result was further split into annual time series as a measure to investigate the consistency of the performance across time.

Findings

ANN had produced a better forecasting results than the regression based on their trading performance. However, the forecasting performance varied across individual REITs and time periods.

Practical implications

ANN should be considered for use when one were to attempt forecasting the HK-REITs excess returns. However, the trading performance should be always compared with buy and hold strategy prior to make any investment decisions.

Originality/value

This paper tested the predicting power of ANN on the HK-REITs and the consistency of its predicting power.

Details

Journal of Property Investment & Finance, vol. 38 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 11 February 2019

Chee Kwong Lau and Li Li Wong

The purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property…

Abstract

Purpose

The purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property developers from Hong Kong, Malaysia and Singapore.

Design/methodology/approach

It measures market discount using market-to-book ratio (MTB) and specifies the relations between MTB and the hypothetical determining factors (revenue recognition policy, investment property measurement policy, related party (RP) transaction disclosures and economic rent) in the presence of relevant control variables.

Findings

This study finds that aggressive revenue recognition and investment property measurement policies increase market discounts, but that RP transactions generally contribute positively to reduce the market discounts of property developer shares. Specifically, RP transactions are value-enhancing only if property developers adopt a conservative revenue recognition policy, because markets sensibly see RP transactions that are part of an aggressive revenue recognition policy as earnings management for tunnelling by controlling shareholders, and hence react with discounts. It is also observed that when property developers generate insufficient profit to cover their cost of equity, this generally leads to their shares being traded at market discounts. However, an aggressive revenue recognition policy can reduce market discount if early recognition contributes positively to economic rent.

Practical implications

This study provides valuable evidence of the economic consequences (market discounts) of accounting choices on recognition and measurement, and the disclosure of accounting information. This is crucial to managers of property developers in managing their firm values when exercising accounting discretion.

Originality/value

This study provides empirical evidence on market discounts as they relate to property developers, which has been limited (past studies focus on property investment companies and real estate investment trusts).

Details

Journal of Property Investment & Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 2 February 2015

Graeme Newell, Anh Khoi Pham and Joseph Ooi

REITs have taken on increased significance in Asia in recent years, with Singapore REITs (S-REITs) becoming an important property investment vehicle since 2002. The…

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1470

Abstract

Purpose

REITs have taken on increased significance in Asia in recent years, with Singapore REITs (S-REITs) becoming an important property investment vehicle since 2002. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of S-REITs in a mixed-asset portfolio context in Singapore over 2003-2013. The post-GFC recovery of S-REITs is also assessed.

Design/methodology/approach

Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of S-REITs over 2003-2013 is assessed, with efficient frontiers and asset allocation diagrams used to assess the role of S-REITs in a mixed-asset portfolio. Sub-period analyses are conducted to assess the post-GFC recovery of S-REITs.

Findings

S-REITs delivered strong risk-adjusted returns, being the best-performed asset class, but with little portfolio diversification benefit over 2003-2013. Whilst taking on reduced risk, but with less portfolio diversification benefits in recent years, S-REITs are seen to be robust relative to the other major Singapore asset classes; contributing significantly across the risk spectrum; particularly in the post-GFC period, where S-REITs have been the best-performed asset class in Singapore.

Practical implications

The results highlight the important strategic role of S-REITs in a Singapore mixed-asset portfolio. The strong risk-adjusted performance has highlighted the robustness of S-REITs, with S-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum; particularly in the post-GFC period. This robustness highlights the ongoing strategic role of S-REITs in a Singapore mixed-asset portfolio, as well as the ongoing development of S-REITs as an important pan-Asia hub for REITs.

Originality/value

This paper is the first published empirical research analysis of the risk-adjusted performance of S-REITs and the role of S-REITs in a portfolio. Given the increased significance of REITs in Asia, this research enables empirically validated, more informed and practical property investment decision-making regarding the role of S-REITs in a mixed-asset portfolio and S-REIT performance in a post-GFC context.

Details

Journal of Property Investment & Finance, vol. 33 no. 1
Type: Research Article
ISSN: 1463-578X

Keywords

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