Asian Real Estate Investment Trust Research Articles

The Dynamics of the Impact of the Covid-19 Pandemic on Pan-Asia’s Real Estate Investment Trusts

Abstract This study evaluated the dynamics of Real Estate Investment Trusts (REITs) in Pan-Asian countries impacted by COVID-19. The countries comprised Malaysia, Thailand, Indonesia, Singapore, Vietnam, South Korea, Japan, China, the Philippines, and Hong Kong. The study aimed to understand how the global crisis affected the real estate industry, specifically publicly traded companies. The COVID-19 pandemic significantly impacted many industries worldwide, including real estate. It caused changes in supply and demand dynamics, disrupted business operations and affected economic activity. The pandemic has also caused a general economic slowdown, with businesses struggling and unemployment rates increasing in some countries in Asia. This in turn has led to reduced consumer spending and lower demand for all types of properties, impacting the overall performance of the Asian REITs market. This study employed techniques such as Sharpe ratio, variance ratio, and Analysis of Variance (ANOVA) to highlight the dynamics of Asian REITs towards the impact of COVID-19. The findings revealed that all Asian countries were severely impacted by COVID-19, with Japan REITs experiencing the highest drop and Taiwan REITs experiencing the lowest decline.

Uncertainty Due to Pandemic and the Volatility Connectedness Among Asian REITs Market

With increasing COVID-19 cases and instability of many financial markets, we examine the role of uncertainty due to infectious diseases in influencing volatility connectedness among Asian Real Estate Investment Trust market. Our result unveils the importance of uncertainty due to pandemic in driving the connectedness among the markets in both the mean and variance. These results carry implications for hedging and portfolio diversification for financial participants.

스폰서 소유권이 리츠의 시장 위험과 유동성 위험에 미치는 영향*

This paper investigates effects of sponsor ownership on the Market Risk (Systematic risk) and the Liquidity Risk using Asian real estate investment trust (REIT) data. Previous literature warns that the sponsored REIT structure may cause the agency problem, and insists that the sponsor ownership management relieves the agency problem. However, our empirical findings show that there is an inverse-U relationship between the sponsor ownership and the two risks (the market risk and the liquidity risk), which indicates that from the risk management perspective, the sponsor ownership management has no effect. This finding can be explained by the fee business model. The sponsor has a motivation for the asset secularization, and an external manager who makes an option contract of performance, acquisition, and divestment fee with REIT has a motivation for the aggressive management style. In particular, the sponsor has the position of both parties in property transactions. In consequence, Asian REITs take a risk of excessive related party transactions. The findings of this study suggest that the REITs’ governance and regulations need to be improved for monitoring of the related party transaction (RPT) and the fee contract, in relation to control structure and in a systematical level.

International Real Estate Review

The market integration of real estate investment trusts (REITs) in the US and four Asian markets as well as between their local stock and REIT markets are investigated in this paper. Using a number of modern econometric techniques on three integration indictors/proxies: time-varying conditional correlations, dynamic risk connectivity (variance-covariance) and cause and effect dependency of linear /nonlinear spillover and connectedness, we find that the five REIT markets show less integration than their corresponding stock markets. Moreover, the modelling of the portfolio risk spillover and connectedness (with covariance) shows a higher average level of market integration for the Asian REIT group. The REIT markets have experienced some significant shifts in their net total and net-pairwise directional risk connectivity. Additionally, investors and policymakers are reminded that any modelling of the cause and effect dependency of the REIT markets should be implemented with linear regression equations and a nonlinear value at risk system in risk spillover and connectedness (with covariance). Finally, significant contagious effects are identified across the REIT markets and stock and REIT portfolios during the global financial crisis and China stock market crash.

An Examination of Prevalence of Earnings Management in Asia REITs

This study examines the prevalence of earnings management in Real Estate Investment Trust (REIT) funds in Asia. Discretionary Accruals (DA) is used as the measurement of earnings management. A panel data covering all REIT firms in three countries: Malaysia, Singapore and Hong Kong, from year 2007 to 2015 is used for this purpose. The results show all firms having the absolute value of discretionary accruals indicating that earnings management exists in Asian REITs. Further, independent t-test shows that earnings management activities are significantly prevalent in all these three countries despite the regulatory structure of REITs.

Corporate governance and performance of REITs

PurposeThis study aims to investigate the relationship between corporate governance (CG) and performance of Real Estate Investment Trust (REITs) in Singapore and Malaysia.Design/methodology/approachThe CG attributes that contribute best toward R-Index scores are tested followed by analysis of whether R-Index scores contribute toward better performance of the REITs when controlled for growth, firm size and leverage. Regression analysis using structured equation modeling (SEM) is instituted.FindingsAll attributes in the R-Index except management ownership are significantly correlated to R-Index. Regression analysis using SEM reveals that all the three measures of performance are significant. When controlled for growth and firm size, CG mechanisms reduce the impact of losses. However, highly levered firms could be risky for investors despite strong CG mechanisms.Research limitations/implicationsAll S-REITs and M-REIT sampled were grouped as one regardless of the country differences, which may have limited the results and findings. The R-Index used to score the CG practices for Asia is still very new.Practical implicationsFindings of the study will help REIT policymakers to update scorecards frequently. Loss-making REITs must emphasize on specific CG attributes to enhance their overall CG scores to gain market confidence and procure financial assistance through better disclosure.Originality/valueDue to research scarcity on CG effectiveness associated with performance of Asian REITs after the global financial crisis, this study comes as a timely contribution in understanding the relationship between CG and performance of REITs.

The Impact of Corporate Governance Moderating Effects on the Performance of REITs in Asia

Corporate governance can have an effect on the organizational behavior of real estate investment trusts (REITs). We examine the moderating effects of corporate governance on Asia REITs' performance. We find significant corporate governance moderating effects on the performance of Asian REITs. Corporate governance could either act as a positive or a negative moderator that could enhance and accelerate performance, return on assets (ROA), return on equity (ROE), and REIT return, and reduce agency costs in Asian REITs. The findings imply that there is a need for transformation and reform in REIT corporate governance. The findings contribute towards Asian REITs' public policy development as REIT corporate governance is found to complement the institutional legal setting and externally managed REITs in Asia. Regulatory bodies of Asian REITs should enforce mandatory and absolute stringent corporate governance regulations on REITs.

Demystifying the Management Structure Puzzle: an Empirical Investigation into the Drivers of REIT Internalization

Real estate investment trusts (REITs) have grown to become an important financial product in Asia, which today stands as the second largest REIT market in the world. Although existing literature has shown that externally managed REITs have underperformed their internally managed counterparts, the Asian REITs market has a strong preference for the external management model. This paper investigates the factors that drive REITs to internalize or deter them from internalizing their manager by studying the characteristics of 26 internalization subjects in Australia at their point of internalization. We compare their financial, corporate governance and portfolio characteristics to a control group. We find the MBR, the parent of the REIT manager, the asset size, and the geographic diversity of assets to be significant determinants of the probability of these REITs internalizing their manager. The low growth prospect faced by large Australian REITs that had a domestic investment focus motivates them to internalize their manager.

An Overview of the Initial Performance of the South African REIT Market

South Africa implemented the real estate investment trust (REIT) structure in 2013 with the intention of encouraging local and international investment. A year after implementation, South African listed property was reported to have performed better than United Kingdom, European, and Asian REITs. In this study, we assess the initial performance of South African REITs and their portfolio diversification benefits when paired with stocks, bonds, T-bills, and other listed property in a mixed-asset portfolio, over the May 2013 to December 2015 period. The findings show that stocks are the best performing asset, risk-adjusted. REITs are a return-enhancer when included in a mixed-asset portfolio, and tend to contribute at the higher end of the risk spectrum.

Sponsor Ownership in Asian REITs

This study examines the relationship between sponsor ownership and firm performance proxied by firm value, operating cash flow, and dividend policy with Asian real estate investment trusts (REITs) in Japan, Hong Kong, Malaysia, and Singapore for the period from 2002 to 2012, focusing on both the incentive alignment effect and the entrenchment effect. Our study sheds new light on effective corporate governance for Asian REITs that are prone to agency problems. Such agency problems arise from the inequitable distribution of power to sponsors that results from the external management structure. The findings suggest that larger sponsor ownership aligns the interests of sponsors and minority shareholders and enhances the performance of Asian REITs, while such an effect diminishes as sponsors become more entrenched. We find that the incentive alignment effect and entrenchment effect are primarily driven by developer-sponsored REITs. Also evident is that the presence of institutional investors mitigates agency problems and increases firm performance.

Modeling the volatility of Asian REIT markets

This paper analyzed the volatility behavior of Asian real estate investment trust (REIT) markets. The autoregressive conditional heteroscedasticity (ARCH)-family models were applied for the purpose of conducting the in-sample fitting test and out-of-sample forecasting test. Results showed that the fractional integrated EGARCH model was the best model in forecasting the volatility for most of the Asian REIT markets. The outcome of this study would be useful for REIT investors in understanding the volatility of the Asian REIT markets. Similarly, policy-makers can also make use of this information to create derivate pricing for the future.

The Determinant Factors of Real Estate Investment Trust (REIT)’s Performance: Evidence from Asian REITs

Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} This paper investigates the factors that can influence the Real Estate Investment Trust (REIT)’s performance, paying particular attention to the listed REIT’s in Asian.   Samples of 45 Asian listed REITs are selected from five different countries namely Taiwan, Thailand, Malaysia, Hong Kong, Japan and Singapore for 5 years basis from 2007 to 2011 with 225 observations. Study used Net Asset value (NAV) and Return as the proxy for REITs performance while risk, dividend yield, net income and size to represent the determinants variable. Applying correlations and multiple regression analysis, the results provide evidence on the association between NAV and return with risk, dividend yield, net income and size of REITs. Results of this study are hoped to help the investors and portfolio managers to deepen their understanding of the dependence factors that might influence the performance of REITs in Asian. Keywords : Net asset value (NAV), Real Estate Investment Trust (REITs), Risk and Dividend Yield.

Examining volatility spillover in Asian REIT markets

This article provides international evidence on the effects of volatility spillover in Asian real estate investment trust (REIT) markets. Six Asian markets (Taiwan, Japan, Malaysia, Singapore, Hong Kong and South Korea) are examined through the generalized autoregressive conditional heteroscedasticity (GARCH) model with exogenous variables in the variance equation. Results show a negative spillover effect from the stock to REIT market, but a positive spillover from the bond to REIT market. During the financial crisis from 2007 to 2009, the negative volatility spillover from the stock to REIT market is significantly enhanced. This suggests that a prosperous stock market would decrease conditional volatility in the REIT market and the effect is more pronounced during the financial crisis.

Volatility clustering, leverage, size, or contagion effects: The fluctuations of Asian real estate investment trust returns

This paper analyzes the volatile behavior of index returns in the following Asian real estate investment trust (REIT) markets: South Korea, Singapore, Japan, Taiwan, Hong Kong, Malaysia and Thailand. It also analyzes the conditional volatilities of REIT returns and determines whether any volatility clustering, size, liquidity, or contagion effects exist in their fluctuations. The results indicate that all REIT returns have volatility clustering effects. Moreover, the behavior of the REIT returns in Singapore, Hong Kong, Malaysia, and Thailand are similar, with their fluctuations being caused mainly by the size effect. In Japan, South Korea and Taiwan, the REIT returns are mostly connected with the stock markets because of the contagion effect in these countries. Finally, the Japan REIT market is the most volatile, with its market returns being influenced by leverage, size, and contagion effects simultaneously.

Time dependent behavior of the Asian and the US REITs around the subprime crisis

PurposeThe study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the real estate investment trusts (REITs) for four countries (Australia, Japan, Taiwan and the USA) before and after the 2007 financial crisis.Design/methodology/approachThe study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the REITs.FindingsThe results show that after the financial crisis, REITS returns show a stronger linkage to the overall market returns but they are not sensitive to expected interest rate movements, except for the Taiwanese REIT market, which shows a negative and significant reaction to the interest rates. There are stronger asymmetric effects of good and bad news on REIT returns particularly after the post financial crisis for the four REIT markets.Research limitations/implicationsAn examination of the relationship between REIT and the stock market provides information as how REIT provides an effective device related to the stock portfolio diversification.Practical implicationsIt would be interesting to see how the Asian REIT markets differ from the US market on return and risk behavior.Originality/valueThe 2007 subprime crisis happened because of the decline of the real estate market prices in the USA. It represents a special opportunity to examine the time‐dependent behavior of REIT returns in a turbulent market environment.

The convergent behavior in REIT markets

PurposeThe purpose of this paper is to analyze whether a convergent behavior exists in the price indexes of the seven Asian Real Estate Investment Trust (REIT) markets.Design/methodology/approachThe authors investigate the convergent behavior in Asian REIT indexes against Japan and the USA by conducting the unit‐root testing procedure.FindingsResults show that the Asian REIT markets are more connected with the US REIT market than with that of Japan. The convergent behavior was more obvious since 2007.Practical implicationsThe underlying assets of real estate securities in different countries are usually not directly related; hence, there should be segmentation to a certain extent between international REIT markets as well. If the performances of Asian REIT markets are converged, this linkage can be viewed as a contagion effect.Originality/valueThe results of this paper indicate that the risk of REITs might be underestimated and the benefit that investors may acquire from adding REITs to their portfolios might be overestimated.

Interest Alignment and Insider Shareholdings in the Emerging Asian REIT Markets

Executive Summary. The Asian real estate investmenttrust (REIT) markets have recently experienced an explosivegrowth. However, studies on their corporate governancehave been limited. This paper aims to fill the gapby testing the effects of board independence and shareownershipstructure on the performance of sample AsianREITs. Using dynamic panel regressions with instrumentalvariables on sample REITs in five Asian markets,the relationship between insider shareholdings andboard independence is found to be non-linear. Insiderswith large shareholding interests do not entrench theircontrols by selecting fewer and friendly independent directorsonto the boards. Consistent with the hypothesisof Morck, Shleifer, and Vishny (1989), large shareholdingsby insiders (sponsors) are viewed as a signal of interestalignment with small shareholders. Asian REITswith large controlling insiders outperform other REITsthat are not backed by strong insiders' shareholdings.

Are there efficiency gains for larger Asian REITs?

PurposeThe 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/approachThree 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.FindingsThe 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/implicationsThis 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/valuePast 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.

Optimal portfolio allocation with Asian Hedge Funds and Asian REITs

During the past years, the institutional interest in investments into hedge funds and Real Estate Investment Trusts (REITs) has grown considerably. In this paper, the benefits of investing in these asset classes are analysed by applying models that recognise higher-order moments or the whole return distribution like the power-utility, Omega- and Score-value model. Trying to obtain more general results than those we can find from historical data only, we modelled the asset returns by Markov switching processes and did a Monte Carlo study. Within this design, we analysed the optimal allocations to hedge funds and REITs statically and with monthly reallocations based on data from Asian markets. Our main findings are that in the static case the utility model and the Score model are dominant, whereas the mean-variance model appears to be the model of the first choice in the dynamic case. In both settings, hedge funds are the most dominant asset of the optimal portfolios. REITs are mainly used for diversification and added at comparably lower rates.