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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.

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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: 1 August 2002

Robert D. Campbell and C.F. Sirmans

This is a policy paper that examines the most important issues that must be addressed in designing the institutional structure for tax‐advantaged public real estate

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2738

Abstract

This is a policy paper that examines the most important issues that must be addressed in designing the institutional structure for tax‐advantaged public real estate companies in Europe. The real estate investment trust form of corporate structure was first created in the USA in 1960. In Europe, the real estate invstment trust (REIT) regime has been authorized only in The Netherlands, and very recently in Belgium. However, the establishment of REIT‐like public investment vehicles is under discussion in the UK, and in several Continental European nations. Advocates of European REITs believe that these investment vehicles would reduce costs of capital, improve liquidity in local real estate markets, and promote more efficient allocation of capital. European countries that are moving toward the establishment of REITs face a series of important decisions regarding the features of the institutional environment in which these firms will operate. This paper summarizes the most important decisions that must be made, and considers the policy implications of each. We conclude that the US model should not be adopted uncritically in Europe; instead, structural options should be considered carefully. Problems of international taxation are identified, and the possible development of a pan‐European REIT structure is discussed.

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Journal of Property Investment & Finance, vol. 20 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 6 March 2009

Hong Wang, Yining Sun and Yin Chen

The purpose of this paper is to propose advice on the design of pilot real estate investment trusts (REITs) and the future development of a REITs market in China.

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2149

Abstract

Purpose

The purpose of this paper is to propose advice on the design of pilot real estate investment trusts (REITs) and the future development of a REITs market in China.

Design/methodology/approach

This study presents a qualitative analysis on unique attributes of the Chinese market. Taking those attributes into account, it goes onto offer suggestions and ideas on how China can most successfully kick off its REITs industry.

Findings

The paper finds that REITs offer developers an alternative, less risky way to raise money. They would also provide owners with an exit strategy. REITs implementation should be a two‐stage process. Pilot REITs should be made available to institutional investors first and later to retail investors. Most importantly, current legislation and taxes do not provide an environment conducive to REITs. The paper also finds that it is presently a favorable market environment under which to launch REITs, owing to pent up demand for REITs amongst investors.

Practical implications

The greatest practical implications of this study are the suggestions offered in terms of what Chinese pilot and long‐term REITs should look like. Pilot REITs can be implemented using special regulations. For post‐pilot REITs, currently existing Chinese trust schemes and special asset management plans offer possible, but problematic, frameworks. Perhaps more promising is the possibility of legislation modeled after China's current securities fund law. This paper implies that new regulations and laws are needed before REITs can be launched in China, as well as gives advice as to what those laws should look like.

Research limitations/implications

There are no REITs yet in China, so a trenchant quantitative study is impossible. This paper is a preliminary work to be followed by a quantitative analysis once China REITs have been operating for long enough to offer sufficient data.

Originality/value

This is one of the only papers examining China pilot REITs in the context of China's economic, legal, and tax environment. It takes previous studies a step further by offering specific legal, regulatory, and tax frameworks that would aid the development of China REITs.

Details

Journal of Property Investment & Finance, vol. 27 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 12 August 2020

Levent Sumer and Beliz Ozorhon

Under the current Coronavirus Disease 2019 (COVID-19) pandemic circumstances where the gold prices are increasing and the stocks are in free fall, this research aims to…

Abstract

Purpose

Under the current Coronavirus Disease 2019 (COVID-19) pandemic circumstances where the gold prices are increasing and the stocks are in free fall, this research aims to compare the returns of gold prices and Turkish real estate investment trust (T-REIT) index by covering the 2008 global financial crisis, 2018 Turkish currency crisis and 2020 COVID-19 pandemic-based economic crisis periods and examine the effects of the returns of gold and the T-REIT index on each other, a research area that has been limited in the literature.

Design/methodology/approach

For the empirical analysis, vector auto regression model was used, and Augmented Dickey–Fuller and Granger causality tests were also conducted. The average returns were compared with the coefficient of variation analysis.

Findings

The results of the study exhibited that except for the 2008 global financial crisis period, 2018 Turkish currency crisis and 2020 COVID-19 pandemic-based economic crisis, the T-REIT index performs better than gold prices, but it is a riskier instrument, and both investment instruments do not affect the returns of each other. The segmentation of both instruments recommends the fund managers including both tools for diversification of a portfolio.

Research limitations/implications

In Turkey, gold prices are valued based on the fluctuations of the global gold prices, as well as the Turkish Lira/US Dollar currency exchange rates. The effect of the exchange rates may be considered in future studies, and the study may be conducted based on the USD values of the T-REIT index and global gold prices. Further studies may also include the comparison between the T-REIT index returns and a set of commodities such as the Goldman Sachs Commodity Index. This study covered only the first five months of 2020 to analyze the COVID-19 pandemic-based economic crisis initial effects, and a successor study is also recommended by including more new data of the post-COVID-19 pandemic and comparing both results.

Practical implications

The results of the research are expected to contribute to the REIT literature and give insight to investors about their investment choices while including both investment tools in their portfolio, especially for the future conditions of the new COVID-19 pandemic-based economic crisis.

Social implications

The study may provide insight for individuals, especially those who are considering possible investment options in the Turkish real estate market in the post-COVID-19 pandemic crisis.

Originality/value

Gold and real estate have always been considered as important investment instruments. Gold is commonly accepted as a safe haven in the literature, and the REITs are considered as long-term investment instruments by many scholars. While gold prices increase in the windy periods, the returns of real estate investments have more cyclical movements based on mostly the macroeconomic conditions and its integration with stock markets, yet the real estate is a common long-term investment tool, especially because of the regular income it generates for the retirement years. By covering three crisis periods including the COVID-19 pandemic-based economic crisis effects, making research about two important investment tools would contribute to the literature, especially in which the studies in this area were very limited.

Details

Journal of European Real Estate Research , vol. 14 no. 1
Type: Research Article
ISSN: 1753-9269

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Abstract

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The Savvy Investor’s Guide to Pooled Investments
Type: Book
ISBN: 978-1-78973-213-9

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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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Book part
Publication date: 27 June 2014

C. Sherman Cheung and Peter Miu

Real estate investment has been generally accepted as a value-adding proposition for a portfolio investor. Such an impression is not only shared by investment

Abstract

Real estate investment has been generally accepted as a value-adding proposition for a portfolio investor. Such an impression is not only shared by investment professionals and financial advisors but also appears to be supported by an overwhelming amount of research in the academic literature. The benefits of adding real estate as an asset class to a well-diversified portfolio are usually attributed to the respectable risk-return profile of real estate investment together with the relatively low correlation between its returns and the returns of other financial assets. By using the regime-switching technique on an extensive historical dataset, we attempt to look for the statistical evidence for such a claim. Unfortunately, the empirical support for the claim is neither strong nor universal. We find that any statistically significant improvement in risk-adjusted return is very much limited to the bullish environment of the real estate market. In general, the diversification benefit is not found to be statistically significant unless investors are relatively risk averse. We also document a regime-switching behavior of real estate returns similar to those found in other financial assets. There are two distinct states of the real estate market. The low-return (high-return) state is characterized by its high (low) volatility and its high (low) correlations with the stock market returns. We find this kind of dynamic risk characteristics to play a crucial role in dictating the diversification benefit from real estate investment.

Details

Signs that Markets are Coming Back
Type: Book
ISBN: 978-1-78350-931-7

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Article
Publication date: 25 April 2008

Ulrich Schacht and Jens Wimschulte

Germany is the biggest real estate market in Europe. Although some established vehicles for indirect property investments are available, the German real estate market is…

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2102

Abstract

Purpose

Germany is the biggest real estate market in Europe. Although some established vehicles for indirect property investments are available, the German real estate market is dominated by direct investments and lags behind its international peers in capital market integration. The purpose of this study is to examine whether the recent launch of German REITs may improve this situation.

Design/methodology/approach

Existing indirect property investment vehicles and the new G‐REIT are analysed and compared along the dimensions of transparency, liquidity and risk/return characteristics. In addition, potential capital flows into G‐REITs are investigated and economic implications derived.

Findings

The study identifies the limitations of existing German indirect real estate investment vehicles and demonstrates the superior characteristics of the new G‐REIT. Substantial short‐term capital flows from existing vehicles to G‐REITs are, however, unlikely. Instead the temporary exit tax will foster an economically beneficial reallocation of capital by private companies and public authorities through property sales to new domestic and international investors via G‐REITs.

Originality/value

The results indicate that G‐REITs have the potential to attract substantial funds in the medium term and facilitate a more integrated and developed German property and capital market.

Details

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

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Article
Publication date: 1 August 2016

Kim Hin David Ho and Shea Jean Tay

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Practical implications

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.

Social implications

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

Originality/value

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

Details

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

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Article
Publication date: 13 February 2017

Nor Nazihah Chuweni and Chris Eves

This paper aims to present a conceptual model on the efficiency of Islamic real estate investment trusts (I-REITs) available in Malaysia. The key difference between the…

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1046

Abstract

Purpose

This paper aims to present a conceptual model on the efficiency of Islamic real estate investment trusts (I-REITs) available in Malaysia. The key difference between the Islamic and their conventional investment vehicle part is mainly its own Shariah framework. For instance, I-REITS must comply with the requirement of Securities Commission Act 1993 as well as the Guidelines on Islamic Real Estate Investment Trusts (Islamic REITs Guidelines).

Design/methodology/approach

The paper reviews and synthesises the relevant literature on the performance analysis and efficiency measurements of REITs. The paper then develops and proposes a conceptual model to measure the efficiency of Malaysian and Islamic REITs.

Findings

The paper identifies and examines the appropriate methods and instruments to measure the efficiency in relation to the risk and profitability of I-REITs. The efficiency measure is important for the fund managers to maximise the shareholders’ return in an investment of property portfolio as well as proposing the best way to allocate resources efficiently.

Research limitations/implications

This is a preliminary review of current work that identifies the issues that will be addressed in future empirical research. The authors will be undertaking this future empirical research in measuring the efficiency of Malaysian real estate investment trusts (M-REITs), particularly the I-REITs, using the non-parametric approach of data envelopment analysis.

Originality/value

To date, there has been very limited research on the efficiency measurement of I-REITs. The current analysis of REIT has been focused on traditional non-Islamic funds. This paper will review and discuss the current literature on efficiency measurement to determine the most appropriate approaches and methodologies for future application in performance analysis of efficiency measure for Malaysian and Islamic REITs.

Details

Journal of Islamic Accounting and Business Research, vol. 8 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

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