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Article
Publication date: 4 December 2020

David H. Roberts, Ettore A. Santucci, Mark Schonberger and Peter W. Lavigne

Over 15 years ago Goodwin created the first open-ended, non-traded real estate investment trust (REIT) with regular sales and redemptions at net asset value (“NAV REIT”)…

Abstract

Purpose

Over 15 years ago Goodwin created the first open-ended, non-traded real estate investment trust (REIT) with regular sales and redemptions at net asset value (“NAV REIT”). While NAV REITs are now well established, there is still room for improvement.

Design/methodology/approach

We traced the evolution of the NAV REIT’s innovative, investor-friendly features – transparent valuation to strike NAV, liquidity via redemption at NAV per share, indefinite life, lower/simpler selling and management fees, share classes with different upfront loads and trailing distribution fees.

Findings

To improve the liquidity feature of NAV REITs, share classes could be used to lower the drag on performance and match available liquid assets with expected redemption requests. The goal: balance inflows and outflows, optimize portfolio construction, and better safeguard liquidity.

Practical implications

One need not look far for the dark side of liquidity in open-ended real estate funds. The UK experience with regulated property funds is a painful object lesson. There is a better way: while traditional non-traded REITs were designed and marketed for investment by retail investors, NAV REITs appeal to a diverse range of investors, and share classes could be enhanced to offer both a menu of selling loads and a menu of liquidity and dividend-rate options to produce a smooth curve blending cost and time.

Originality/value

Innovation in structuring real estate investment vehicles has broadened choices for all and the NAV REIT is flexible, scalable, open-ended and cost-efficient. Fund sponsors, fund managers, financial advisors, investors and even regulators could find food for thought in our analysis.

Details

Journal of Investment Compliance, vol. 21 no. 2/3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 9 July 2020

Omokolade Akinsomi

Real estate investment trusts (REITs) are historically considered as attractive assets to investors particularly as the underlying assets are properties which are…

Abstract

Purpose

Real estate investment trusts (REITs) are historically considered as attractive assets to investors particularly as the underlying assets are properties which are income-producing. REITs also distribute substantial amount of profits as dividends to shareholders. Stephen and Simon (2005) find that REITs in a mixed asset portfolio of stocks and bonds enhance returns and reduce risk. This paper examines the role a pandemic (COVID-19) plays in the performance of global REITs index and REIT sectors.

Design/methodology/approach

To examine the effects of COVID-19 on REITs, the year-to-date (YTD) returns of global returns index and REITs sectors in the United States are observed and a comparative analysis is employed from January 2020 to May 2020.

Findings

Based on a three-month return ending 22 May 2020, FTSE EPRA NAREIT index is the biggest loser at −31.83% whilst the FTSE EPRA Asia–Pacific index has the lowest loss at −23.20%. The author examines YTD returns which show disparities on the effect of COVID-19 on REIT sectors. The US market is examined; most REIT sectors suffered big losses as at April 2020; the analysis reveals YTD returns for the top three REIT sector losers are lodging/resort REITs (−45.81%), retail REITs (−41.16%) and office REITs (−22.63%). Data centre REITs are the only sector REITs with positive returns at 17.66%.

Practical implications

Most sector REITs during the pandemic have lost considerable value based on YTD returns as at May 2020. Flight to quality is expected during this uncertain period to REITs such as data REITs, grocery-anchored REITs and storage REITs. These REITs are not as adversely affected by COVID-19 in comparison to other REITs.

Originality/value

This paper identified the impact of COVID-19 on the performance of global REITs and US sector REITs during the periods from January 2020 to May 2020.

Details

Journal of Property Investment & Finance, vol. 39 no. 1
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 December 2004

Phillip S. Scherrer

As equity markets decline, bonds and REITs (Real Estate Investment Trusts) become more appealing to investors. Although REITs stocks are equity based their continual…

Abstract

As equity markets decline, bonds and REITs (Real Estate Investment Trusts) become more appealing to investors. Although REITs stocks are equity based their continual return is more bond‐like in nature. This article addresses the analyses process for investing in real estate based equities.

Details

Corporate Governance: The international journal of business in society, vol. 4 no. 4
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 7 March 2016

Bill Dimovski

A variety of papers have analyzed the underpricing of REIT IPOs or property company IPOs. The purpose of this paper is to compare the two sectors and examines differences…

Abstract

Purpose

A variety of papers have analyzed the underpricing of REIT IPOs or property company IPOs. The purpose of this paper is to compare the two sectors and examines differences in the underpricing of the two types of IPOs.

Design/methodology/approach

An OLS regression is used to identify factors influencing the underpricing of A-REIT and property company IPOs from 1994 until 2014.

Findings

This study finds that A-REIT IPOs have a significantly lower underpricing on average than Australian property company IPOs. The time taken to list appears to influence the underpricing of both A-REIT IPOs and property company IPOs, in that issues that are filled more quickly have higher underpricing but with the magnitude of the impact being less for A-REITs. The sentiment toward the stock market also appears to impact on the underpricing of A-REIT and property company IPOs again with the magnitude of the impact being less for A-REITs.

Practical implications

The paper provides information to new A-REIT and property company issuers, underwriters and investors.

Originality/value

The study is the first to compare and examine the differences in the underpricing of both REITs and property companies in the one country over the same time period.

Details

Journal of Property Investment & Finance, vol. 34 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 August 2016

Stephen Lee

The purpose of this paper is to empirically examine the effect on US stock, bond and real estate investment trust (REIT) prices triggered by the US Federal Reserve…

Abstract

Purpose

The purpose of this paper is to empirically examine the effect on US stock, bond and real estate investment trust (REIT) prices triggered by the US Federal Reserve Chairman Ben Bernanke’s announcement of a possible intent to unwind, or taper, quantitative easing (QE). In particular, the author assessed whether the effect of the “Taper Tantrum” was fundamental or financial on financial markets.

Design/methodology/approach

The methodology used to determine whether the effect of the “Taper Tantrum” was fundamental or purely financial is that suggested by French and Roll (1986) as extended by Tuluca et al. (2003). The analysis is based on daily data for large cap stocks, small cap stocks, long-term bonds and REITs for 18 months before Ben Bernanke’s announcement and for 18 months after the announcement.

Findings

The results show that the “Taper Tantrum” had a fundamental, rather than a financial effect on all asset classes, especially so for REITs.

Practical implications

The author also found that in the post-taper period following Ben Bernanke’s announcement the correlation of REITs with stocks decreased compared with pre-taper period, whereas the correlation of REITS with bonds increased substantially. In other words, the “Taper Tantrum” had a profound effect on the risk/return benefits of including REITs in the US mixed-asset portfolio.

Originality/value

This is the first paper to examine the effect of the “Taper Tantrum” on REITs.

Details

Journal of Property Investment & Finance, vol. 34 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

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Article
Publication date: 3 February 2012

Vivek Sah and Philip Seagraves

The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional…

Abstract

Purpose

The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional evidence of market timing in this sector.

Design/methodology/approach

A sample of REIT IPOs is analyzed to determine the relationship between IPO clustering and several measures of REIT operating performance.

Findings

The results suggest that timing the market by marginal firms in the REIT sector would be difficult, due to the transparent nature of REITs, leading to lower level of informational asymmetry between REIT managers and investors. Consistent with results found for non‐REIT firms in industry clusters, no evidence was found of a significant difference between the operating performance of REITs which are part of an IPO cluster and those that went public outside of the identified cluster periods.

Practical implications

This study shows that REIT market is efficient and would not allow REIT managers to time the market.

Originality/value

Using stringent measures of identifying REIT IPO clusters and operating performance as a measure to gauge market timing, this study differs from previous studies and provides additional and robust evidence of transparent nature of REITs that leads to reduced information asymmetry between managers and investors. This result supports the theory that REITs are more transparent and thus less likely to be over‐invested during IPO cluster periods.

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Article
Publication date: 28 July 2021

Elias Abu Al-Haija and Mehveen Syed

The Islamic Capital Market (ICM) has witnessed tremendous growth over the years. One of the most interesting growth curves in the ICM instruments is that Islamic Real…

Abstract

Purpose

The Islamic Capital Market (ICM) has witnessed tremendous growth over the years. One of the most interesting growth curves in the ICM instruments is that Islamic Real Estate Investment Trusts (I-REITs). The purpose in this paper is to highlight the concept of I-REIT and to presents a comparative analysis for Emirates I-REIT and Al-Salam I-REIT of UAE and Malaysia to find out the implications of the major differences between the two countries I-REITs.

Design/methodology/approach

This paper uses the data in the two I-REITs' financial reports from the years 2015 to 2019. A descriptive (Observational design) data analysis approach is used in comparing both I-REITs by focusing on five different variables that include: portfolio, governance, financial performance, Shariah compliance and risk management.

Findings

The findings offer evidence of key differences between the two countries regarding the I-REITs. The differences found in the implication for all variables that the paper presented, especially the size of the portfolio for each I-REIT along with the Shariah compliance and risk management, Al Salam “Malaysia” used more standard approach than UAE in which the SSB is responsible for setting the guidelines for Emirates REIT. Also, the risk management technique used by the two REITs differs from one another.

Practical implications

This research paper provides an insight for the capital market sectors as an initiative to improve and develop the ICM to play its important role in the economy.

Originality/value

This research paper is an initiative to compare and evaluate the implications of major differences between the I-REITs of the two countries only in the light of recent development in the ICM.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 29 June 2021

Emre Çelik and Kerem Yavuz Arslanli

This paper aims to determine the specific financial ratio's effects on market value and return of assets for Turkish real estate investment trusts (REITs) traded at…

Abstract

Purpose

This paper aims to determine the specific financial ratio's effects on market value and return of assets for Turkish real estate investment trusts (REITs) traded at Istanbul Stock Exchange (ISE). The paper intends to define liquidity ratios, financial structure ratios, return ratios and stock performance ratios related to market value and return of asset.

Design/methodology/approach

The study includes 17 REITs traded in ISE. The period of study is specified as the year from 2009 to 2018. Panel data analysis is applied in this study. Dependent variables are current market value and return of assets, independent variables are 12 financial ratios, which are considered to explain the model significantly. These ratios will be calculated from audited year-end balance sheets for specific periods throughout at least ten years as time series. Two different models and hypotheses have been established to identify the financial ratios that affect the market value and return of assets for REITs.

Findings

According to the results, long-term financial loans/total assets, return of equity and working capital ratio are negatively correlated with market value, while market value/book value and total assets are correlated positively. On the other hand, market value/book value ratio, price/earning ratio, long-term financial loans/total assets and earnings per share are correlated with return of assets. REITs have high levels of financial leverage, especially in foreign currency. The striking point is that REITs hardly ever do not use financial derivatives to hedge their position again currency and interest rate risk. This approach makes the financial structures of REITs vulnerable and fragile against market volatility.

Originality/value

In Turkey, as an example of an emerging market, financial borrowing does not increase the return rates and market value for REITs due to market's idiosyncratic properties. This finding provides substantial insight into how the debt and equity allocation of Turkish REITs should be structured. Also, it has been observed that forward-looking expectations are considered more than the current situation in the market.

Details

Journal of European Real Estate Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 8 July 2021

Hyesook Min, Seungwoo Shin and Paloma Taltavull de La Paz

This paper analyzes how three major industrial stock indices related to South Korean real estate industries are affected by the exogenous shock of the measures taken to…

Abstract

Purpose

This paper analyzes how three major industrial stock indices related to South Korean real estate industries are affected by the exogenous shock of the measures taken to control COVID-19, coupled with investor sentiment, which has global impacts.

Design/methodology/approach

The paper uses daily stock market indices on three major stock price indices: construction industry sector index, real estate operating company (REOC) industry index and the real estate investment trust (REIT) industry index of the Korea Stock Exchange (KRX), from January 8, 2020, when the World Health Organization (WHO) began to issue official indicators regarding COVID-19, to March 27, 2020, the last trading day of the week during which the South Korean government's stock market stabilisation fund was launched.

Findings

Results indicate the REIT sector's stock rate of return to be relatively less sensitive to impacts of COVID-19 compared to those of the two other indices. Impulse response analysis also shows similar results. Impulse response estimations indicate that earlier information of REITs has prominent significance in explaining changes in the time series process itself. Similar to findings of prior studies that have been conducted with long-term perspectives, results of our short-term study indicate that the medium-risk, medium-return characteristic of the real estate industry has significance even in short-term perspectives.

Practical implications

REITs can be an investment vehicle that provides strong benefits of diversified investment for mutual fund investment managers even in the case of short-term exogenous market disruptions.

Originality/value

The analysis run in the empirical exercise is the first to consider the sensibility between international stock exchanges to the effects of measures taken to control COVID-19 impact.

Details

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

Keywords

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Article
Publication date: 10 June 2021

Zhenyu Su and Paloma Taltavull

This paper aims to analyse the risk and excess returns of the Spanish real estate investment trusts (S-REITs) using various methods, though focusing primarily on the…

Abstract

Purpose

This paper aims to analyse the risk and excess returns of the Spanish real estate investment trusts (S-REITs) using various methods, though focusing primarily on the Fama-French three-factor (FF3) model, over the period from 2007Q3 to 2017Q2.

Design/methodology/approach

The autoregressive distributed lag model is used for the empirical analysis to test long-term stable relationships between variables.

Findings

The findings indicate that the FF3 model is suitable for the S-REITs market, better explaining the S-REITs’ returns variation than the traditional single-index capital asset pricing model (CAPM) and the Carhart four-factor model. The empirical evidence is reasonably consistent with the FF3 model; the values for the market, size and value are highly statistically significant over the analysis period, with 68.7% variation in S-REITs’ returns explained by the model. In the long run, the market factor has less explanatory power than the size and value factors; the positive long-term multiplier of the size factor indicates that small S-REIT companies have higher returns, along with higher risk, while the negative multiplier of the value indicator suggests that S-REITs portfolios prefer to allocate growth REITs with low book-to-market ratios. The empirical findings from a modified FF3 model, which additionally incorporates Spain’s gross domestic product (GDP) growth rate, two consumer price index (CPI) macro-factors and three dummy variables, indicates that GDP growth rate and CPI also affect S-REITs’ yields, while investment funds with capital calls have a small influence on S-REITs’ returns.

Practical implications

The regression results of the standard and extended FF3 model can help researchers understand S-REITs’ risk and return through a general stock pattern. Potential investors are given more information to consider the new Spanish investment vehicle before making a decision.

Originality/value

The paper uses standard techniques but applies them for the first time to the S-REIT market.

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