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The performance of Real Estate Investment Trust (REIT) can be literarily explained in terms of its operational success which is revealed in its profitability to the investors (Grupe & DiRocco, 1999). A company's success in investments is usually measured by its profitability. The objective of this study is to examine the role of determinant factors...
Context in source publication
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... 2009, Bursa merged both the main board and the second board of Bursa Malaysia into a single market which is known as the Main Market while the Malaysian Exchange of Securities, Dealing & Automated Quotation (MESDAQ) was renamed as Access, Certainty and Efficiency (ACE). Figure 1 shows the regulatory structure of Bursa Malaysia under the supervision of Securities Commission (SC) and Ministry of Finance (MOF). Real Estate Investment Trusts (REITs) can be said as an investment tools for investors to generate appealing returns, besides than investing in bonds, unit trust, shares and direct ownership of real property (Alias & Soi, 2011). ...
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Citations
... The real estate market has developed into the second-largest investment alternative after fixedincome instruments, but bigger than the money market and stocks, claims Pham (2013). The three most prevalent categories of listed property items are real estate investment funds, property firms, and property securities funds (Jakpar, 2018). Real estate investment trusts (REITs), one of the listed property assets, have become the best investment choice for both individual and institutional investors. ...
Real Estate Investment Trusts (REITs), which are essentially regulated collective investment vehicles, allow investors to contribute funds in exchange for the acquisition of rights or interests in a trust that is divided into units with the goal of becoming beneficiaries of the trust and receiving income or profits from real estate. They might provide a way to supplement the delivery of various programs, like the affordable housing initiative that is still gaining ground in Kenya, due to their exclusivity and alternate source of finance. To this end, Nairobi Securities Exchange created the REITs market segment to attract the listing of REITs companies. However, as seen by the valuation of the share prices, the performance of the listed REITs has not been as favourable as anticipated. The insufficient subscriptions and unmet listing requirements show that other real estate developers' attempts to issue new income (I-REITs) and development (D-REITs) have failed. This begs the question of whether the REITs' surprising performance could be ascribed to outside variables, such as property diversification attributes-independent of the investing market. The purpose of this study was to investigate the relationship between REIT performance in Kenya and the diversification attributes of properties. Primary data was gathered from fund managers, stockbrokers, investment banks, and property developers. To ascertain the degree of independence and convergence of the constructs as they relate to the investigation, the paper used exploratory factor analysis (EFA), path analysis via analysis of moment structures regression. Principal component analysis was employed to establish if items extracted through EFA were related. The component matrix factor loadings for property diversification attributes were then extracted. Lastly, using Alpha at a 0.05 significance level, structural equation modelling was employed to assess the hypothesized associations. The findings show a highly significant association between property diversification attributes and Kenyan REIT performance. For REIT investors, geographic diversification of assets is also crucial since it lowers market risks. The paper therefore concludes that geographic and economic diversification of the underlying properties of REITs, as well as property type, are essential factors in REITs' performance and can increase investors' interest in REITs. In order to attract potential investors who might be interested in REITs properties with such diversification attributes, it is advised that REITs issuers make sure that their properties are diversified to include a variety of property types.
... The previously cited studies have focused on the determinant of the REIT's stock market returns, not the REIT's accounting ROE. Jakpar et al. (2018) approached the study of the REIT's ROE determinants by modeling the ROE as the dependent variable, and defining as independent variables the dividend yield, the net asset value and also the price-earnings ratio. They found that neither the net asset value nor the price-earnings ratio had a statistically significant relation with ROE. ...
Purpose
This study aims to study the sensitivity of nonlisted real estate investment companies’ accounting earnings to house prices. This study evaluates whether house price changes determined these companies’ return on equity (ROE) or if other factors influenced the industry’s profitability beyond house price growth.
Design/methodology/approach
The authors collected a ten-year sample with the aggregate ROE of Portugal’s real estate investment companies, split by regions, and data on house prices and the per capita gross domestic product as a control variable. The authors ran a national-level time series with the canonical cointegrating regression estimator, which is robust to a small sample size; the authors also performed a regression on regional-level panel data with the common correlated effects mean group estimator, thus allowing slope coefficient heterogeneity and controlling for cross-sectional dependence. The authors also ran ordinary least squares regressions as a means of comparison.
Findings
This study found that an increase in the house price is not translated into an increase in the aggregate ROE. The results are robust with a reduced survivorship-biased sample, meaning that even the best-succeeded real estate investment companies do not have their accounting ROE dependent on house price growth.
Research limitations/implications
The sample size is small and specific to one country. This paper did not study the housing market structure to verify whether it operates under monopolistic competition, which could further explain the attained results.
Practical implications
Policy decision-makers should know that there are no excess profits in the real estate investment companies’ industry because of house price growth that could be subject to windfall taxes.
Originality/value
To the best of the authors’ knowledge, the connections between house prices and real estate investment companies’ accounting earnings have never been studied.
... According to Pham (2013), the real estate market has grown to become the second-largest investment option after fixed-income securities, but larger than the money market and equities. Real estate investment funds, property firms, and property securities funds make up the three most common kinds of listed property goods (Jakpar, 2018). One of the listed property assets, real estate investment trusts (REITs), have emerged as the top investment option for both retail and institutional investors. ...
p>The listed REITs have not performed as well as anticipated, and efforts by REIT management to issue further real estate securities have been delayed. This raised the question of whether the unexpected performance of REITs in Kenya was caused by external variables, including property diversification, which is out of the control of the investment market. Thus, the study sought to examine the relationship between property type-location diversification and the performance of REITs in Kenya. The target group included fund managers, stock brokers, investment banks, and property developers. A predictive correlational research design was used. At a 5% significance level, regression analysis was used to test the hypothesized relationship between variables. The results indicate that property type-location diversification has a significant relationship with the performance of REITs in Kenya. The findings also show that the location of properties is a very important aspect for REIT investors when it comes to property diversification. There was agreement among most respondents that diversifying REITs across location attributes reduces market risks. It can be concluded diversification of the REITs underlying property majorly in terms of geographic and economic influence performance of REITs in Kenya. Further, property diversification through the type of property is a key determinant in influencing the performance of REITs in Kenya. Thus, continued property-type location will enhance the uptake of REITs by investors. It is recommended that REITs issuers ensure that there is diversification of the properties to include multiple property types such as students’ hostels, retail stores, hotels, and warehouses. Such a type of diversification is likely to attract potential investors who could be interested in properties with such diversification characteristics.
JEL : G40, R30, C12, C51, L21
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... Since the 2000s, the property market has grown to be the second-largest investment alternative after fixed-income instruments, but larger than the money market and stocks, according to Pham (2013). Real estate investment funds, property firms, and property securities funds make up the three most popular subcategories of listed property securities (Jakpar, 2018). One of the listed real estate assets, real estate investment trusts (REITs), have emerged as the top investment option for both retail and institutional investors. ...
Purpose- The performance of the listed REITs has not been as expected and efforts by REIT managers to issue more real estate securities have been slow. This posed the concern of whether the unexpected performance of REITs in Kenya was due to external factors, such as investor awareness, which is not under the control of the investment market. Thus the study sought to examine how investor awareness influences performance of REITs in Kenya. Methodology- Predictive correlational research design was employed while target population comprised of Fund Managers, Stock Brokers and Investment Banks and Property Developers. Structural Equation Modelling was used to test the hypothesized relationships at 5% significance level. Findings-The results indicate that investor awareness have no significant influence on performance of REITs in Kenya. Majority of the respondents agreed that they were knowledgeable about Kenya's real estate market, and their membership in the REITs Association of Kenya has provided insightful market research and databases. Such investors can access with ease reports of the REITs issuing firm. Further, although investors usually follow and update themselves on the REITs markets through the online platform, such awareness does not influence the level of performance of REITs in Kenya. Conclusions- It can be concluded that although efforts have been put in place to ensure investors' awareness of real estate securities, such efforts have not boosted the uptake of REITs among investors. Investor awareness efforts employed by Capital Markets Authority in conjunction with the REITs Association of Kenya are not likely to enhance the performance of REITs in Kenya. The results indicate that REITs uptake has not attained a critical mass necessary to create liquidity in the capital market. Based on the findings, there is minimal publicity campaigns carried on by the Capital Markets Authority to sensitize potential investors on REITs. Keywords: Investor awareness, performance of REITs, property market. JEL Codes G40, R30, C12, C51, L21
... ROA and current ratio have a positive relationship with firm value, while acid test ratio has a negative relationship. Jakpar et al. (2018) determine that the most critical factor that affects the ROA of REIT companies in Malaysia is the stock return (positive). Ma'in et al. (2018) examine the effect of macroeconomic factors and firm characteristics, including inflation and interest rate, gross domestic product (GDP), dividend yield and market capitalization, on the performance of REITs. ...
Increasing income levels and the desire to live a more comfortable life in countries with an increasing population are constantly driving the demand for real estate. Real estate investment trusts (REITs) are capital market institutions that can invest in real estate, real estate-based capital market instruments, real estate projects, real estate-based rights, and capital market instruments. In addition, they establish partnerships to realize specific projects, engage in other permitted activities, and are organized by the Capital Market Law in Turkey. In this study, the fixed-effects panel data regression model is used to determine the financial indicators that affect the market value and profitability of the Turkey REITs that are traded in the Borsa İstanbul REITs Index. The study covers 21 REIT companies. The data set is in the period between 2010:Q1 to 2019:Q4 in the analyses. The results show that return on assets (ROA), return on equity (ROE), asset turnover, leverage, equity multiplier, and current asset turnover are effective on the market to book ratio (MBR). The ratios that affect the ROA are MBR, ROE, acid-test, leverage, equity multiplier, EBITDA/sales, and current asset turnover. Moreover, the ratios that affect the ROE are the ROA, MBR, acid-test, asset turnover, leverage, and equity multiplier.
... However, return on equity and return on assets ratios realized positive on average. Jakpar et al. (2018) apply panel data analysis to determine factors that affect REITs' return on equity of Malaysia. Eight REITs included in the research and period is from 2008 to 2015. ...
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.
... The performance of Real Estate Investment Trust (REIT) can be literarily described in terms of its operational success translated into increase in returns (Jakpar, 2018). ...
This study investigates the determinants of REITs (REITs) in order to investigate the performance of investment trusts in real estate in G-7 countries. For this purpose, a sample of 31 listed REITs from the United States, United Kingdom, Germany, Italy, Canada, France, and Japan was selected for a period from 2012 to 2021. The study employs Net Asset Value (NAV) as a proxy for REIT performance and considers various other factors as determinants, including net income, dividend yield, leverage, interest rates, inflation, foreign exchange rates, and size. The study applies a fixed effect with Driscoll and Kraay's standard error approach and results revealed a significant and positive influence of dividend yield, net income, foreign exchange rates, and size upon the net value of REITs. This concludes that these factors boost the performance of REITs. Conversely, this study discloses that both leverage, as well as interest rates, are significantly reducing the performance of REITs. The findings of this study provide valuable insights for investors and portfolio managers, aiding in the expansion of their understanding of the influential factors that impact the performance of REITs. By considering these factors, stakeholders can make more informed investment decisions in the REIT market.
It is defined as an investment that individuals use a source or value they own to provide income. Real estate investment trust companies are providing alternative tools to invest in bonds, stocks, etc. by converting real estate holdings from their portfolios into securities. Among the key benefits of real estate investment trust companies are that they have a certain economic cycle, as opposed to bonds, a protective against inflation, and reliable returns. Real estate investment trust companies operate in 41 countries as of 2021, with a market volume of $42 trillion. In Türkiye, which is part of the real estate investment trust sector's category of developing countries, there are 37 real estate investment trust companies and the total market value is 6860 million euros. The other country included in the study is Malaysia, which also falls under the category of developing countries in the industry. In Malaysia, there are 18 real estate investment trust companies with a total market value of 8519 million euros. The aim of the study is to identify the importance of factors affecting the profitability of the companies of the two countries through the Random Forest Regression method. For this purpose, data from 2013.Q1 to 2022.Q1 were used from the companies of the two countries. As a result of the study, it has been determined that the variables with the most significant impact on the assets and equity profitability of the two countries are total debt total assets rate and logarithm of total assets ratios.
