Search results

As significant listed property investment vehicles, industrial and logistics REITs (I&L REITs) have recently enhanced their property portfolios, often replacing the traditional industrial properties with logistic properties to gain strategic exposure to recent e-commerce trends. This paper aims to assess the investment performance of I&L REITs by assessing the significance, risk-adjusted performance and portfolio diversification benefits of I&L REITs in the Pacific Rim region from July 2011 to December 2018. The strategic property investment implications for I&L REITs are also identified.

Monthly total returns from July 2011 to December 2018 were used to analyse the risk-adjusted performance and portfolio diversification benefits for I&L REITs in the United States, Japan, Australia and Singapore. An asset allocation diagram was employed to assess the strategic role of I&L REITs in a mixed-asset portfolio in each case.

I&L REITs generally possessed superior average annual returns compared with the other sub-sector REITs, stocks and bonds in the United States, Japan, Australia and Singapore between July 2011 and December 2018, with desirable portfolio diversification benefits. Importantly, a more significant role for I&L REITs was generally observed in the mixed-asset portfolio compared to the other sub-sector REITs in each of these four markets across the broad portfolio risk spectrum. This reflects I&L REITs delivering enhanced portfolio returns and offering portfolio diversification benefits in a mixed-asset portfolio in the United States, Japan, Australia and Singapore.

Property investors, particularly property securities funds (PSFs) and income-oriented investors, should consider including I&L REITs in their mixed-asset portfolios, as Pacific Rim–based I&L REITs provided an attractive REIT investment sub-sector, co-existing alongside the other sub-sector REITs and major asset classes in a mixed-asset portfolio in a Pacific Rim context, as well as being a portfolio diversifier. These results confirm the added-value and strategic role of I&L REITs in a mixed-asset portfolio, seeing I&L REITs as an effective investment pathway for I&L property exposure in the Pacific Rim region.

This is the first study to assess the investment performance of I&L REITs in the Pacific Rim region, evaluating their significance, risk-adjusted performance and portfolio diversification benefits, and the role of I&L REITs in a mixed-asset portfolio in the United States, Japan, Australia and Singapore. More importantly, this research is the first paper to provide empirical evidence on I&L REITs, which have often transformed their traditional industrial property portfolios with increased levels of logistics property to gain exposure to recent e-commerce trends. This research enables more informed and practical property investment decision-making regarding I&L REITs and their added-value and strategic role in a mixed-asset portfolio, as well as delivering effective I&L property exposure in the Pacific Rim region, with the added benefits of liquidity, transparency and fiscal efficiency.

Recognising that different property sectors have distinct risk-return characteristics, this paper assesses whether changes in the level and volatility of short- and long-term interest rates differentially affected excess returns of sector-specific Real Estate Investment Trusts (REITs) in the Pacific Rim region between July 2006 and December 2018. The strategic property risk management implications for sector-specific REITs are also identified.

Daily excess returns between July 2006 and December 2018 are used to analyse the sensitivity in the level and volatility of interest rates for REITs among office, retail, industrial, residential and specialty REITs across the USA, Japan, Australia and Singapore. The generalised autoregressive conditionally heteroskedastic in the mean (GARCH-M) methodology is employed to assess the linkage between interest rates and excess returns of sector-specific REITs.

Compared with diversified REITs, sector-specific REITs were less sensitive to short- and long-term interest rate changes across the USA, Japan, Australia and Singapore between July 2006 and December 2018. Of sector-specific REITs, retail and residential REITs were susceptible to interest rate movements over the full study period. On the other hand, office and specialty REITs were generally less sensitive to changes in the level and volatility of short- and long-term interest rate series across all markets in the Pacific Rim region. However, the interest rate sensitivity of industrial REITs was somewhat mixed. This sector was sensitive to interest rate movements, but no comparable evidence was found since the onset of GFC.

The insignificant exposure to interest rate risk of sector-specific REITs may imply that they have a stronger interest rate risk aversion and greater hedging benefits than their diversified counterparts, particularly for office and specialty REITs. The results support the existence of REIT specialisation value in the Pacific Rim region from the interest rate risk management perspective. This is particularly valuable to international property investors constructing and managing portfolios with REITs in the region. Property investors are advised to be aware of the disparities in the magnitude and direction of sensitivity to the interest rate level and volatility of REITs across different property sectors and various markets in the Pacific Rim region. This study is expected to enhance property investors' understanding of interest rate risk management for different property types of REITs in local, regional and international investment portfolios.

The study is the first to assess the interest rate sensitivity of REITs across different property sectors and various markets in the Pacific Rim region. More importantly, this is the first paper to offer empirical evidence on the existence of specialisation value in the Pacific Rim REIT markets from the aspect of interest rate sensitivity. This research may enhance property investors' understanding of the varying interest rate sensitivity of different property types of REITs across the USA, Japan, Australia and Singapore.

This study aims to examine the performance and volatility of Turkey Real Estate Investment Trusts (Turkish REITs) as the world is adjusting to the new normal situation in every aspect of REITs' business activities.

The prices of REITs were acquired from 26 Turkish REITs in this study, but owing to autocorrelation difficulties, 14 Turkish REITs were employed in the analysis. The ten-year long-term bond of the Turkish Government was also utilized and the period of data obtained was based on availability. The performance of Turkish REITs was evaluated using Sharpe's ratio and Treynor's ratio, and the volatility was assessed using MGARCH-BEKK.

The authors found out that Turkish REITs are constantly underperforming and the REITs' returns remain highly volatile and persistent. In addition, findings showed evidence of volatility clustering and the asymmetric impact of shocks. This study further revealed the uniqueness of each of the Turkish REITs due to the lack of evidence of multicollinearity.

However, the limitation of this study is the constraint in obtaining more macro-economic variables of more than ten-years of Turkey's Government bond and the study focused mainly on Turkish REITs.

The result suggests that since Turkish REITs are not mandatory to payout 90% of taxable earnings as dividends, high performance and an appropriate risk management approach are expected. The need for timely revealing performance of T-REITs and associated uncertainty may trigger better performance as discussed in the relationship between disclosure and performance which is recently emphasized in a recent study by Koelbl (2020). With current performance and associated uncertainty in Turkish REITs, the need to protect Turkish REITs investors is highly essential. The result further educates REIT investors that diversification benefits of REITs tend to reduce in extremely risky situations.

This is the first study in the context of Turkish REITs that comprehensively integrated market capitalization of REITs and simultaneous evaluation of performance and the volatility of the Turkish REITs as the world adjusts to the new normal.

The purpose of this paper is to examine the risk neutral and non-risk neutral pricing of Singapore Real Estate Investment Trusts (S-REITs) via comparing the average of the individual ratios (of deviation between expected and observed closing price/observed closing price) with the ratio (of standard deviation/mean) for closing prices via the binomial options pricing tree model.

If the ratio (of standard deviation/mean) ratio > the ratio (of deviation between expected and observed closing price/observed closing price), then the deviation of closing prices from the expected risk neutral prices is not significant and that the S-REIT is consistent with risk neutral pricing. If the ratio (of deviation between expected and observed closing price/observed closing price) is greater, then the S-REIT is not consistent with risk neutral pricing.

Capitacommercial Trust (CCT), Capitamall Trust (CMT) and Keppel Real Estate Investment Trust (REIT) have large positive differences between the two ratios (39.86, 30.79 and 18.96 percent, respectively), implying that these S-REITs are not trading at risk neutral pricing. Suntec REIT has a small positive difference of 2.35 percent between both ratios, implying that it is trading at risk neutral pricing. Ascendas REIT has the largest negative difference between the two ratios at −4.24 percent, to be followed by Mapletree Logistics Trust at −0.44 percent. Both S-REITs are trading at risk neutral pricing. The analysis shows that CCT, CMT and Keppel REIT exhibit risk averse pricing.

Results are consistent with prudential asset allocation for viable S-REIT portfolio investing but that not all these S-REITs exhibit strong market efficiency in their pricing.

Pricing may be risk neutral over a certain period but investor sentiments, fear of risks and speculative activities could affect an S-REIT’s risk neutrality.

With enhanced risk diversification activities, the S-REITs should attain risk neutral pricing.

Virtually no research of this nature has been undertaken for S-REITS.

The purpose of this paper is to explore the levels and determinants of net asset value (NAV) premiums/discounts for publicly traded Australian Real Estate Investment Trust (A-REIT) market during the last decade. A-REITs were severely affected by the global financial crisis as S&P/ASX 200 A-REIT index-listed property stocks experienced 47 per cent discount to NAV, on average, in 2008–2009 crisis. Since 2013, A-REIT sector has exhibited a strong recovery from the financial crisis and traded at high premiums to date. Understanding the relationship between pricing in the public and private real estate markets has taken on great importance as A-REITs continue to trade at significant premium to NAV unlike their counterparts in the USA and Europe.

This paper follows a rational approach to explain variations in NAV premiums and explores the company-specific factors such as liquidity, financial leverage, size, stock price volatility and portfolio diversification behind the A-REIT NAV premiums/discounts. The study specifies and estimates a model of cross-sectional and time variation in premiums/discounts to NAV using semi-annual data for a sample of 40 A-REITs over the 2008–2018 period.

The results reveal that A-REIT premiums to NAV can be explained not only by the liquidity benefit of listed property stocks but also positive financial leverage effect. During the past decade, A-REITs have followed an aggressive approach in financing their growth by using borrowed funds to purchase assets as the income from the property offsets the cost of borrowing and the risk that accompanies it. Debt-to-equity ratio has to be considered as an important source of NAV premiums as highly geared A-REITs that favoured debt financing over equity financing traded at significant premiums to NAV of their underlying real estate assets.

The paper includes implications for the REIT market investors. The regression analysis shows that specialty A-REITs with a focus on creative market niches traded at higher premiums compared with other property stocks, especially in the post-GFC recovery period. Specialty REITs are more highly valued by the market than their traditional specialised counterparts (e.g. office and retail REITs), and those pursuing a diversified strategy.

This paper presents an Australian case study as the A-REIT market provides a suitable environment for testing the effect of financial gearing on the REIT premium to NAV. The study provides empirical evidence supporting the importance of debt-to-equity ratio in explaining the variation in A-REIT NAV premiums.

Spanish real estate investment trusts (REITs) emerged as an important and rapidly expanding property investment vehicle, against the backdrop of improving Spain macro-economic fundamentals and commercial property market. This sees Spanish REITs being the 3rd largest REIT market in Europe, offering access to important Iberian and European property assets, with the added benefits of transparency, governance and liquidity. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of Spanish REITs in a mixed-asset portfolio over August 2014–February 2018.

Using monthly total returns, the risk-adjusted performance and portfolio diversification potential of Spanish REITs over August 2014–February 2018 are assessed. Asset allocation diagrams are used to assess the role of Spanish REITs in a mixed-asset portfolio.

Spanish REITs delivered strong risk-adjusted returns compared to stocks over August 2014–February 2018, but with limited portfolio diversification benefits. Compared to bonds, Spanish REITs offered competitive risk-adjusted returns and excellent diversification benefits. Importantly, this sees Spanish REITs as strongly contributing to the Spanish mixed-asset portfolio across the portfolio risk spectrum.

The 2012 Spanish REIT regulatory changes have been pivotal in providing a supportive environment for Spanish REITs’ growth. Spanish REITs are now a significant market in a European context. The results highlight the major role of Spanish REITs in a Spanish mixed-asset portfolio. The strong risk-adjusted performance of Spanish REITs compared to stocks sees Spanish REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as an increasing number of investors have utilised Spanish REITs to obtain their property exposure in a liquid format in recent years.

This paper is the first published empirical research analysis of the risk-adjusted performance of Spanish REITs, and the role of Spanish REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of Spanish REITs in a portfolio.

This study aims to investigate the impact of corporate diversification and growth opportunities on the performance of real estate investment trusts (REIT) in Malaysia and Singapore before and during the pandemic.

The sample consists of 33 public-listed REITs across Singapore and Malaysia. A dynamic panel system generalized method of moments (DPS-GMM) estimation is used to account for unobservable factors and a relatively short sample period (2009–2022).

Results indicate that the impact of diversification is contingent on the market where the REIT is based and other institutional factors. The estimates also show that diversified REITs are better able to weather period of economic uncertainty.

We provided a definitive answer as to why corporate diversification leads to conflicting outcomes – market and institutional factors, strategic intent and the overall economic environment. We also show that the impact of typical firm controls (i.e. free cash, size) can differ. Future firm-level work should thus study similar phenomenon more contextually and carefully consider these varying effects.

The literature is divided on the impact of diversification on firm performance. By using a two-country sample, we show conclusive evidence that this contradictory outcome is due to market and institutional factors. We also show evidence that strategic intent is an important factor that influences the outcomes of diversification, regardless of market. We also infer that excess cash aids the resilience of the firm, contrary to the negative perception of excess cash during normal times. Firm size, in contrast, does not contribute to firm performance during a crisis.

The purpose of this paper is to analyze chapters from the recently published Routledge REITs Research Handbook to identify five major future directions for international equity REITs.

Literature review and critical analysis of chapters from the recently published Routledge REITs Research Handbook.

The five major future directions for international equity REITs are proposed to comprise an increasing focus on people and on cash flow rather than on property (with the cognitive risk attaching thereto), the changing nature of REITs as they respond to changes in society globally, the evolution of the global flagship REIT and the emergence of global regulation of REITs (particularly in the spheres of debt and leverage).

While five major future directions for international equity REITs are identified which may have an impact on the risk/return profile, further research is required to determine which directions may be significant and which trivial and which may be independent and which interactive.

Identification of five major future directions for international equity REITs provides managers and promoters with guidance concerning potential areas of focus for future product development in the REIT sector.

While quantitative research concerning international equity REITS abounds, qualitative research is limited with little academic research undertaken into possible future directions for the sector.

As one of the increasingly important alternative property sectors, data centres are a technology-focused property sector that is taking advantage of the growing investment intensity in technology-related infrastructure, against the backdrop of constant innovation and advancement in technology. The purpose of this paper is to assess the preliminary risk-adjusted performance and portfolio diversification benefits of data centre Real Estate Investment Trusts (REITs) in the USA, Australia and Singapore. The strategic implications going forward for data centres as an innovative property sector in the property investment space are also highlighted.

Using monthly total returns, the average annual return, annual risk, risk-adjusted performance and portfolio diversification benefits of data centre REITs in the USA, Australia and Singapore over 2016–2018 are assessed. Optimal asset allocation analysis is performed to investigate the value-added role of data centre REITs in a mixed-asset portfolio.

Data centre REITs delivered strong average annual return performance, outperforming the composite REITs in all three markets. This also sees data centre REITs being riskier than the overall REIT sector due to the non-traditional and maturing status of the data centre property sector. On a risk-adjusted basis, competitive performance was recorded for data centre REITs, with data centre REITs in the USA and Singapore outperforming their respective composite REITs. This performance is also delivered with significant portfolio diversification benefits with the stock market, resulting in data centre REITs contributing to the US mixed-asset portfolios across a diverse risk spectrum.

Institutional investors are now giving increased emphasis to alternative property sectors with better risk-return trade-offs. Improved performance and diversification benefits are achieved by supplementing existing property portfolios with non-traditional property sectors with counter-cyclical risk-return profiles, one of which is the data centre property sector. This sees data centres as an important alternative property sector, having technology-based drivers and being recognised as having a clear path towards institutionalisation with the major investors in the near future.

This paper is the first published empirical research analysis that specifically assessed the preliminary performance and diversification benefits of data centre REITs in the USA, Australia and Singapore. This research enables empirically validated, more informed and practical property investment decision making by institutional investors regarding the future strategic role of the data centre property sector as an innovative sector in the institutional property investment space.

Unlike previous studies on capital structure decisions, the purpose of this paper is to focus on US real estate investment trusts (REITs) in order to find out the main determinants of capital structure choice for real estate companies and in order to verify if they are related to factors similar to those affecting the decisions of public firms in other sectors.

Using a methodology similar to Rajan and Zingales, a sample of 119 listed REITs with different investment strategies and in different property sectors was analyzed. The analysis is carried out in order to determine the basic factors underpinning the capital structures by selecting financial items and ratios related with leverage (such as asset size, profitability ratios, tangibility of assets, growth opportunities, operating risk and geographical diversification of investments).

Results show that REITs follow a pecking order theory of financing since more profitable firms are less levered and REITs with more growth opportunities have higher leverage ratios. The tangibility of assets turns out to be positively correlated with leverage, while REITs whose operating risk is high prefer a lower financial risk and consequently a lower gearing. Finally, it is not clear how size affects leverage decisions and more diversified REITs appear to be riskier.

The research also addresses the issue of asymmetric information and the debt‐equity choice for REITs sampled on the basis of their size, highlighting differences with other business sectors.