Malaysian Real Estate Investment Trust Research Articles

TECHNICAL, SCALE AND MANAGERIAL EFFICIENCIES IN MALAYSIAN REITS: A NON-PARAMETRIC APPROACH

The paper examined technical, managerial and scale efficiencies scores of Malaysian Real Estate Investment Trust (M-REITs). A non-parametric approach of VRS-DEA examined the input and output variables to determine REIT efficiency. We examined their determinants using GLS regression in the second stage. On average, the M-REIT industry has faced technical inefficiency, that involves scale and managerial inefficiencies. This paper presents new estimates through discussion on return as REIT output. The empirical results indicate Islamic REITs exhibited higher efficiency scores than their counterparts. The results from GLS regression analysis suggest that efficient REITs are smaller in size with higher concentration in property sector and geographical area. Having examined these values, there is still some catching-up for the inefficient REITs in the sample to be more competitive to stay relevant in the global market.

The significance and performance analysis of Malaysian real estate investment trusts

Purpose This paper aims to examine the significance and performance analysis of the Malaysian Real Estate Investment Trust (M-REIT) from 2014 to 2018. Design/methodology/approach Performance analysis is done through operating ratio (current ratio), leverage ratio (debt ratio) and efficiency ratio (return on asset and return on equity). Findings M-REIT has been ranked 27th globally and 7th in Asia Pacific REIT market, implying the significance of the market. The trend of market capitalisation of M-REIT had flourished from 2014 to 2017 but declined in 2018. The total assets of M-REIT have been seen thriving over the years with both Islamic REIT market capitalisation and total assets showing improvements throughout the year. From the viewpoint of efficiency ratios of ROA and ROE, Islamic REIT is deemed more favourable to investors than conventional REITs, implying the high receptive of Islamic REITs. Research limitations/implications In terms of efficiency of operation, it is evident that several sectors of REITs may be at risk of liquidity due to the decline in current ratio from 2014 to 2018, as current ratio of less than 1 is considered a red flag. Originality/value Performance analysis on the performance of each sector as the outcome of the research could ease investors’ decision-making as whether it can be considered as one of the viable investments available in the market.

Conventional REITs, Islamic REITs and macroeconomic variables in Malaysia: a review

PurposeThe purpose of this paper is to empirically examine the return and dividend characteristics of two different types of Malaysian real estate investment trust (REIT) series, namely, conventional and Islamic, against macroeconomic variables over the period 2011-2017.Design/methodology/approachThe required data are derived from Datastream database. Multiple regression analysis is used to determine the impact of macroeconomic variables on financial performance of 13 Malaysian REIT series.FindingsResults show that the macroeconomic variables are able to predict future returns and dividends of Malaysian REITs. The analysis also suggests that Islamic REITs are seen to be less sensitive to macroeconomic variables and display better portfolio diversification benefits as compared to their conventional counterpart. The ongoing implications for large-cap and small-cap REITs are also highlighted.Research limitations/implicationsThe main limitation of the study is the small percentage of Islamic REITs sample due to limited period of observation available. However, the two Islamic REITs included are representative of Islamic REITs in Malaysia as both of them are listed in the Bursa Malaysia with asset size and market capitalization values more than RM1bn.Practical implicationsThe results of this study may serve as a useful input for financial market players on making strategic business decisions especially with regards to differences between conventional and Islamic REITs characteristics.Originality/valueThe main contribution of this paper is to explore the relationship between REITs and macroeconomic factors on a unique capital market (Malaysia) that allows comparison between conventional and its Islamic counterpart.

Sale and Leaseback Investment Concepts in Malaysian REIT Companies

Sale and leaseback investment has been a growing trend among the Real Estate Investment Trust (REIT) Companies in Malaysia. This study is to determine the important elements in the concepts of the sale and leaseback transactions practiced by the REIT companies. The study uses the NVIVO software to analyze the data interviews with the REIT managers that adopt sale and leaseback investment transactions. With a response rate of 78%, results show there are three main elements namely location, type of lease, and rental. This study forms a useful guide to real estate managers in developing countries towards using the sale and leaseback as one of the alternative methods in property investment.Keywords: sale and leaseback; property investment; REITeISSN: 2398-4287 © 2019. The Authors. Published for AMER ABRA cE-Bs by e-International Publishing House, Ltd., UK. This is an open-access article under the CC BYNC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer–review under responsibility of AMER (Association of Malaysian Environment-Behaviour Researchers), ABRA (Association of Behavioural Researchers on Asians) and cE-Bs (Centre for Environment-Behaviour Studies), Faculty of Architecture, Planning & Surveying, Universiti Teknologi MARA, Malaysia.DOI: https://doi.org/10.21834/e-bpj.v4i12.1942

Evolution of Investments through Sale and Leaseback Investment: A Qualitative Investigation from Malaysian REITs

Sale and leaseback is known as a voluntary investment by owners to free up their equities for other uses while maintaining the use of the facility. In Malaysia, Real Estate Investment Trust (REIT) is one of the institutional investors adopting the sale and leaseback approach for the wide range of new investment technologies to enhance the value of the investment. The aim is to revolutionize the property industry by switching the design of physical asset investments from direct investments to indirect investments influenced by factors determining the property investment yield by analysing and responding to the information received. The research uses a qualitative method due to the limitation in the number of REITs involved in sale and leaseback investments in Malaysia. Using semi structured interviews, the data was recorded, transcribed and analyzed using thematic analyses for multiple interviews. Results indicated three factors that influence the yield which are location, tenants and property type. The result of the study would be a useful guide to Real Estate managers in developing countries to use sale and leaseback as one of the alternative ways to increase the revenue from the property investments.

MEASURING TECHNICAL EFFICIENCY OF MALAYSIAN REAL ESTATE INVESTMENT TRUSTS: A DATA ENVELOPMENT ANALYSIS APPROACH

The research examines the technical efficiency (TE) and economies of scale for the Malaysian Real Estate Investment Trust (M-REITs) from 2010 to 2014, using a non-parametric approach of Data Envelopment Analysis (DEA). The nonparametric approach of Variable Return to Scale DEA (VRS-DEA model) was used to estimate the efficiency scores for M-REITs. The negative inefficient value for the technical inefficiencies is identified as a result of both poor input utilisation (managerial inefficiency) and failure of M-REITs to operate at optimum scale (scale inefficiency). The mean technical efficiency (TE) measures ranged from as low as 41.70% in 2011 to as high as 84.30% in 2014. Despite having the Sharia requirement, Islamic REITs in Malaysia provide an effective investment opportunity evidenced by the higher scores for all efficiency measures, as compared to conventional REITs for the period under study. Pure technical inefficiency has a greater deviation in the efficient frontier than scale inefficiency, suggesting that M-REITs inputs are not fully minimised to produce more outputs. With regard to scale inefficiency, M-REITs are operating at economies of scale, indicating the importance of expansion or growth to improve on efficiency performance. This will then allow M-REIT managers to formulate better strategic investment decisions.

MEASURING TECHNICAL EFFICIENCY OF MALAYSIAN REAL ESTATE INVESTMENT TRUSTS: A DATA ENVELOPMENT ANALYSIS APPROACH

The research examines the technical efficiency (TE) and economies of scale for the Malaysian Real Estate Investment Trust (M-REITs) from 2010 to 2014, using a non-parametric approach of Data Envelopment Analysis (DEA). The nonparametric approach of Variable Return to Scale DEA (VRS-DEA model) was used to estimate the efficiency scores for M-REITs. The negative inefficient value for the technical inefficiencies is identified as a result of both poor input utilisation (managerial inefficiency) and failure of M-REITs to operate at optimum scale (scale inefficiency). The mean technical efficiency (TE) measures ranged from as low as 41.70% in 2011 to as high as 84.30% in 2014. Despite having the Sharia requirement, Islamic REITs in Malaysia provide an effective investment opportunity evidenced by the higher scores for all efficiency measures, as compared to conventional REITs for the period under study. Pure technical inefficiency has a greater deviation in the efficient frontier than scale inefficiency, suggesting that M-REITs inputs are not fully minimised to produce more outputs. With regard to scale inefficiency, M-REITs are operating at economies of scale, indicating the importance of expansion or growth to improve on efficiency performance. This will then allow M-REIT managers to formulate better strategic investment decisions.

TOTAL FACTOR PRODUCTIVITY CHANGE IN THE REIT INDUSTRY: THE CASE OF MALAYSIAN REITS DURING AND POST GLOBAL FINANCIAL CRISIS

The paper examined productivity changes for the Malaysian Real Estate Investment Trust (M-REITs) using a non-parametric approach of Malmquist Productivity Index (MPI) of Data Envelopment Analysis (MPI-DEA). Data was attained from M-REIT annual reports, Thomson Reuters Datastream and Osiris via Bureau Van Dijk for 2007-2015. The non-parametric approach of MPI-DEA examined the Total Factor Productivity Change (TFPCH), Technological Change (TECHCH), Efficiency Change (EFFCH), Pure Technical Efficiency Change (PEFFCH) and Scale Efficiency Change (SECH) indices. On average, the M-REIT industry has faced 14.91% of productivity regress during 2007-2015 period, comprising 49.90% of efficiency increase and 33.40% technological regress. The decomposition of the productivity change index suggests that Malaysian REIT productivity changes were mainly due to efficiency change rather than technological change. These findings could help M-REIT managers to formulate ways to enhance their REIT productivity. The findings are also applicable tosimilar Shariah compliant real estate investment or socially responsible investment.

TOTAL FACTOR PRODUCTIVITY CHANGE IN THE REIT INDUSTRY: THE CASE OF MALAYSIAN REITS DURING AND POST GLOBAL FINANCIAL CRISIS

The paper examined productivity changes for the Malaysian Real Estate Investment Trust (M-REITs) using a non-parametric approach of Malmquist Productivity Index (MPI) of Data Envelopment Analysis (MPI-DEA). Data was attained from M-REIT annual reports, Thomson Reuters Datastream and Osiris via Bureau Van Dijk for 2007-2015. The non-parametric approach of MPI-DEA examined the Total Factor Productivity Change (TFPCH), Technological Change (TECHCH), Efficiency Change (EFFCH), Pure Technical Efficiency Change (PEFFCH) and Scale Efficiency Change (SECH) indices. On average, the M-REIT industry has faced 14.91% of productivity regress during 2007-2015 period, comprising 49.90% of efficiency increase and 33.40% technological regress. The decomposition of the productivity change index suggests that Malaysian REIT productivity changes were mainly due to efficiency change rather than technological change. These findings could help M-REIT managers to formulate ways to enhance their REIT productivity. The findings are also applicable to similar Shariah compliant real estate investment or socially responsible investment.

Productivity, Technology and Efficiency Change of Islamic and Conventional Reits in Malaysia

Problem/Purpose – The paper examined total factor productivity changes namely Malmquist Productivity Index (MPI) for the Malaysian Real Estate Investment Trust (M-REITs) by drawing attention to the Islamic and conventional REITs Design/methodology/approach – Data was attained from annual reports for the period of 2007 to 2015. The non-parametric approach of MPI-DEA examined the productivity, technological and efficiency change indices. Findings – The result suggested both Islamic and conventional REITs have exhibited productivity regress of 18.09% and 11.51% respectively during the period of study. These productivity regress could mainly due to the regress in technological rather than efficiency change. One possible reason for this technological regress is likely due to REIT requirement in which the REIT managers could not retain their earning and reinvest their income for the following year. The REIT managers need to have access to external capital for purchasing new asset, which could lead to a higher cost of capital than the retained earnings. On the other hand, both conventional and Islamic REITs exhibited an increase of 28.33% and 61.54% respectively for efficiency change, mainly due to an increase in managerial rather than scale, implying that both REITs have been managerially efficient in managing the operating costs but operating at the non-optimum scale of operations. Research limitations/implications –This study provide empirical evidence on the source of productivity regress for M-REITs and insights on the comparative analysis of Islamic and conventional REITs. Future research suggested to be undertaken include the identification of key determinants for the productivity changes of M-REITs using the parametric approach. Originality/value – This paper is the first analysis on the productivity changes of Islamic REITs vis-à-vis conventional REITs. By examining these values, the identification of main sources of Malaysian Islamic REITs productivity regress assist M-REIT managers to develop strategies in improving their REIT productivity and provide competitive edge in the market.

The Dynamic of Location Attributes Toward Malaysian Real Estate Investment Trust Performance

The Malaysian real estate investment trusts (M-REITs) properties intensive location contributes toward higher rental yield. Nevertheless, the location diversification depends on the type of properties in the portfolio, puzzled shareholder in their investment decision making in M-REITs. This study aim to determine the dynamic of location attributes toward financial performance. The pearson correlation and descriptive analysis of ten years (2006 until 2015) data is used. This study indicate that there is correlation between attributes of economic location with dividend yield(DY) (cor: 0.241). Yet, the market capitalization, have a negative correlation (cor: -0.246), which contradict with prior study on REITs’ location attributes. This study also show that attributes of location of M-REITs properties should located between 5km to 10km from central business district (CBD).This study conclude that in order to ensure M-REITs properties remain competitive for commercial occupancy. The investment on M-REITs proven that dynamic of location attributes is priority, which support that M-REITs design for a long term investment goal.

Property types diversification strategy of Malaysian real estate investment trust (M-REITs)

The aim of this paper is to review the property types diversification strategy of Malaysian REITs. Previous study has found that Malaysian REITs received poor response form investors both local and international. Furthermore, the underperformance of Malaysian REITs was linked to the characteristics of REITs' property types and REITs' portfolio influenced its financial performance. The lack of local study on both of these determinants of influence on performance of Malaysian REITs is a research gap, which needs to be explored that can provide more insight of it. This study showed that the property types such as office space, commercial lot, industrial, hotel and specialized property type are the important determinants, which can influence the performance of REITs. The study comprised of REITs data from 2010 until 2014, and through Multiple Regression Analysis (MRA) reveals there is little influence of property types diversification strategy toward Malaysian REITs' performance. Nevertheless, by employ correlation analysis between each of the five property types with expected return and dividend yield, this study shows Malaysian REITs' performance of dividend yield(DY) has a positive correlation value with commercial lot property type and Malaysian REITs' performance of expected return(ER) have a highest positive correlation value with industrial property types. Also, this study suggests that property type diversification play a significant role in Malaysia REITs. Other determinants such as location of property, market capitalization and REITs' quality of advisory style that might influence the diversification strategy and financial performance of Malaysian REITs.

Performance Determinants of Malaysian Real Estate Investment Trusts

The aim of this paper is to identify determinants of Malaysian real estate investment trust (REITs). By identifying the correct combination of these determinants, it able to assist the REITs companies to construct their property allocation strategy (PAS). However, studies on REITs’ performance in Malaysia showed few arguments on Malaysian REITs. Despite the evidence on potential for diversification, Malaysian REITs received inadequate response from institutional investors. Meanwhile the development of REITs in United States (US) started in early 1960s and it underwent significant cyclical performance and structure changes. Therefore, understanding of the literature review on the weaknesses and strengths of US REITs industry is essential. Furthermore, the lack of local study on these determinants, it is a research gap which can be explored in Malaysian REITs. The correct combination of determinants component contribute toward superior performance on REITs. Based on these reasons, REITs determinants that trigger the performance of Malaysian REITs warrant special attention and investigation. Through the literature review done on REITs determinants, this study manage to design the property allocation strategy for Malaysian. This beneficial for both REITs firm to construct their own PAS to maximize distribution as well as institutional investor to evaluate REITs investment. All in all, ramification of Malaysian REITs determinants helps to improve Malaysian REITs industry.

Risk and Real Estate Investment Trust (REITs) Return: Evidence from Listed Public Trust

This study examines an association of risk and returns of REITs from Malaysian REITs listed companies. The secondary data for analysis is retrieved from Bloomberg's Database of all 13 listed REITs in the Bursa Malaysia main market for three year period, from 2007 to 2009 with quarterly observation. The dependent variables are average return, expected return using Capital Asset Pricing Model, Sharpe Index, and Jensen Alpha Index. The independent variables represented by standard deviation, beta, trading volume, gross domestic product, inlation rate, and share price. The control variable for this study is type of REITs, whether it  was  categorized  as  Islamic  or  conventional  REITs.  Applying  correlations  and  multiple regression  analysis,  the  results  provide  evidence  on  the  association  between  return  and risk  on  REITs.  This  study  is  also  hoped  to  bring  beneits  to  the  public  listed  company  and shareholders in obtaining the key factors in determining the REITs yield. ");} // --> activate javascript

Risk-Adjusted Performance of Malaysian Real Estate Investment Trust Funds

ABSTRACT This study evaluates performance and risk features of Malaysian REIT funds from 2007-2012. Performance evaluation methods employed are Sharpe, Treynor, Jensen, and M-squared measures. The results indicate that beta values are all less than one and that the total risk of REIT funds comes mostly from the unsystematic risk component. While the results emphasize the importance of embedding risk into performance analyses, the findings also provide caution that differences in the risk measures employed give rise to contradictory performance rankings. The low R-squared values for REIT funds suggest low reliability of beta coefficients. The findings therefore imply that the Sharpe ratio and the M-squared measure which quantify risk using standard deviation of return provide more convincing and meaningful performance evaluation than the Treynor and Jensen measures. The results of M-squared measure also illustrate how leverage can be applied as a tool in achieving optimal REIT performance. The findings provide good insights to managers in assessing REIT performance and to investors who are considering REIT as a potential investment vehicle. Keywords: REITs; performance rankings; systematic risk; unsystematic risk; leverage factor ABSTRAK Kajian ini menilai prestasi dan ciri-ciri risiko dana REIT Malaysia dari tahun 2007-2012. Kaedah penilaian prestasi yang digunakan adalah ukuran Sharpe, Treynor, Jensen dan M-squared. Hasil kajian menunjukkan bahawa nilai beta adalah kurang dari satu dan jumlah risiko dana REIT kebanyakannya terdiri daripada komponen risiko tidak sistematik. Walaupun keputusan menekankan kepentingan untuk menerapkan risiko dalam analisis prestasi, penemuan juga menunjukkan bahawa penggunaan ukuran risiko yang berbeza menghasilkan kedudukan prestasi yang bercanggah. Nilai R-square yang rendah untuk dana REIT mencadangkan tahap kebolehpercayaan yang rendah untuk pekali beta. Oleh itu, implikasi hasil kajian menunjukkan bahawa nisbah Sharpe dan ukuran M-squared yang mengukur risiko dengan menggunakan sisihan piawai pulangan memberikan penilaian prestasi yang lebih meyakinkan serta bermakna berbanding dengan ukuran Treynor dan Jensen. Hasil penemuan ukuran M-squared juga memberi gambaran tentang bagaimana leveraj boleh digunakan sebagai alat dalam pencapaian prestasi yang optimum untuk REIT. Hasil kajian memberikan maklumat yang baik kepada pengurus dalam menilai prestasi REIT dan juga kepada pelabur yang sedang mempertimbangkan REIT sebagai alternatif pelaburan yang berpotensi. Kata kunci: REITs; kedudukan prestasi; risiko sistematik, risiko tidak sistematik; faktor leveraj

The development and preliminary performance analysis of Islamic REITs in Malaysia

With the significant growth in Islamic financial products in recent years, the world's first Islamic real estate investment trust (REIT) was established in Malaysia in August 2006, with these REIT portfolios needing to be Shariah compliant. This paper constructs three Malaysian REIT (M‐REIT) series and assesses the significance, risk‐adjusted performance and portfolio diversification benefits of Islamic M‐REITs in a mixed‐asset portfolio in Malaysia over 2006–2008, contrasting this performance with conventional M‐REITs in Malaysia. While the impact of the global financial crisis is evident, Islamic M‐REITs are seen to be a differentiating property investment product from conventional M‐REITs, as well as displaying the defensive characteristics of low‐risk levels and portfolio diversification benefits to those seen by conventional M‐REITs. These differentiating features and portfolio diversification benefits for Islamic M‐REITs were further evident and enhanced in the global financial crisis; reflecting a degree of robustness not seen in most other global REIT markets during the global financial crisis. The ongoing implications for Islamic M‐REITs and Islamic REITs in other global REIT markets are also highlighted.