Performance Analysis of Shariah-Compliant Real Estate Investment Trusts

Abstract

Shariah-compliant investments can be defined as investment vehicles which meet all requirements of Shariah or Islamic law. This research is to conduct a financial analysis of Shariah-compliant real estate investment trusts (REITs) available in the Malaysian market, namely the Axis REIT, Al Aqar REIT and KLCC REIT, Singapore’s Sabana REIT and UAE’s Emirates REIT. Cross-sectional ratio analyses of financial statements are used to ascertain the performance of a company in 2013. This paper presents the preliminary research on the comparative performance of Malaysian REITs with their counterparts in 2013. Emirates REIT was the highest performer of all due to its heavy acquisition of assets in 2013 which have maximised returns to shareholders by means of dividend and share price. Sabana REIT was seen as the lowest performer due to it being severely affected by the global increases in interest rates and volatile environment in the US economy. Malaysian REIT, although not performing as well as Emirates REIT, did not fall as badly as Sabana REIT did. Each company has its own short-term and long-term strategies to maximise returns to shareholders. Hence, expectantly it will trigger more research work on the performance analysis of each property subsector as the Shariah-compliant REITs hold different property portfolios. The outcome of the research will aid decision-making by investors or fund managers on whether a particular REIT can be considered as a viable alternative investment in an investment portfolio.