Cross-Listing of Real Estate Investment Trust

Purpose The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs). Design/methodology/approach The paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences. Findings Cross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample. Research limitations/implications Results are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta. Practical implications The results and findings should incentivise REIT managers to explore viable cross-listing. Social implications Such cross-listing for REITs should enhance risk diversification. Originality/value This is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion

International Portfolio of Real Estate Investment and Hedging: A Revisit

We use office data from ten cities in the Asia-Pacific region from 4Q2001 to 2Q2012 to propose a forward-looking investment appraisal framework to compare the effectiveness of two currency risk hedging strategies for a portfolio of real estate investments in ten cities of seven Asia-Pacific countries. This is aimed at determining the optimal choice among “unhedged”, “artificially” hedged and “natural” hedged options. Analyses based on NPV, IRR, Sharpe Ratio, Jensen’s alpha and stochastic dominance were done for 3, 5 and 7-year holding periods. All the results show that the “natural” hedge strategy is the optimal choice as it provides superior returns

The effectiveness of the direct sales comparison approach to office appraisal in Singapore

The skyline of Singapore’s Central Business District (CBD) reflects the prestige and multitude of office buildings in the city state. Investment in CBD office buildings can amount to billions of Singapore dollars. Any investor in office buildings has indubitably relied or relies primarily on the valuations of these buildings to determine investment returns. The most popular and universally used method for valuing these investment buildings is the Direct Sales Comparison approach. The position adopted in this paper is that even though the wealth of practical experience favours the use of the Direct Sales Comparison approach, it encounters methodological constraints. The lack of some critical information in the available data tends to make the method less effective than it is claimed to be for office valuation; failure to account for the conditions of sale and the terms of financing can introduce distortion of market values. This can lead to the distortion of the asset pricing of local office space. There will be growing concern to regularise the direct sales comparison approach in this regard, and to re-consider the use of the income approach as well as the discounted cash flow approaches, in part or in full

Industrial real estate investment:does the contrarian strategy work?

The superiority of the contrarian investment strategy, though well attested to in the finance literature, has received scant attention, if any, in the real estate literature. This study uses empirical industrial real estate investment return data from 1985Q1 to 2005Q3 for the US, and some Asia Pacific cities in order to ascertain the relative superiority of “value” and “growth” industrial real estate investments. The results show that “value” industrial property investment outperformed “growth” industrial property investment in all the holding periods under consideration. Furthermore the industrial property investments exhibit return reversal. This implies that the superiority of the contrarian strategy is sustainable. The results of stochastic dominance tests validate the relative superiority of “value” over “growth” industrial property investment. This implies that fund managers who traditionally have been favoring prime (i.e. growth) industrial property investment may have to reconsider their investment strategy if they want to maximize their return

Effects of property acquisition and disposal on property stock value

The study utilizes the event study methodology to evaluate the effect(s) of acquisition and/or disposal announcement(s) on the value of property stocks of 22 companies listed on the Singapore Exchange (SGX). The study focuses on the period from 1994 to 1999. It was found that the impact of both acquisition and disposal announcements on shareholder wealth during the period, albeit positive, is not significant at the 0.05 level. However, a company’s announcement of intent to dispose of its asset(s) had a significantly positive cumulative excess return during the period. This implies that, apart from announcement of intent to dispose of asset(s), investors generally cannot significantly profit from a prior knowledge of acquisition and/or disposal announcements. Furthermore, it was found that “size effect” is of no significance to Singapore property stock market

Real Estate Market Cyclical Dynamics: The prime office sectors of Kuala Lumpur, Singapore and Hong Kong

Purpose – The purpose of this paper is to help us understand the real estate cycle and offers an analysis using a vector auto regression (VAR) model. The authors study the key international cities of Hong Kong, Kuala Lumpur and Singapore. The authors find four key outcomes. One, the real estate cycle is generally different from the underlying business cycle in local markets for the cities studies. Two, the real estate cycle is more exaggerated in the construction and development areas than in rents and vacancies. Three, the vacancy cycle tends to lead the rental cycle. And four, new construction completions tend to peak when vacancy is also peaking. The authors believe that future research should try to help understand the linkages that drive these outcomes. For example, are rigidities in the local permit and construction markets responsible for the link between construction peaks and vacancy peaks? / Design/methodology/approach – Real estate market cyclical dynamics and its estimation via VAR model offers an insightful set of practical and empirical models. It affirms a comprehensive theoretical underpinning for analysing the prime office and residential sectors of the capitol cities of Kuala Lumpur, Singapore and Hong Kong in the fast developing Asia region. Its unrestricted form also provides an effective and insightful way of modelling real estate market cyclical dynamics utilising only real estate market indicators, furnished by real estate market data providers. / Findings – The office rental VAR model for Singapore (SOR), KL (KOR) and HK (HOR) show good fits. In the HOR model, rents and vacancies are negatively signed and significant for certain lagged relationships with other variables and with rents themselves. The office CV VAR model for Singapore (SOCV), KL (KOCV) and HK (HOCV) show good fits. In the HOCV model, capital values (CVs) and initial yields are negatively signed and significant for certain lagged relationships with other variables and with CVs themselves. Impulse response functions specified for seven years to mirror a medium-term real estate market cycle “die out” to zero for the stationary VAR models that are estimated for the endogenous variables. The accumulated responses asymptote to some non-zero constant. / Practical implications – The VAR model offers a complete and meaningful dynamic system of solely real estate variables for international real estate investors and policy makers in decision making. Its unrestricted form offers an effective and insightful way of modelling real estate market cyclical dynamics utilising only real estate market indicators, which can be reliably provided by a dedicated real estate information and consultancy provider of international standing. / Originality/value – The theoretical model offers a complete dynamic model system of the real estate space market, comprising a unique system of six linked equations that denote the relationship among supply, demand, construction, vacancy and rent over time, inclusive of price response slopes and lags. The VAR model enables the investigation of the effect of the lagged values of all the variables concerned. It also enables the explicit and rigorous quantitative forecasts of say rents and CVs when the rest of the variable can be forecasted beforehand

Housing Loan and the Price of Housing in Singapore

We use the Johansen co-integration test and the Vector Error Correction Model (VECM) to analyze data on housing loan, housing price, interest rate and GDP from 19911Q to 20102Q to particularly ascertain the extent to which housing loan affects house prices in Singapore. The results show the existence of a long run co-integration among housing loan, house price, interest rate and GDP. Furthermore, housing loan is found to be positively correlated with house price and GDP but negatively correlated with interest rate in the long run. There seems to be no correlation between housing loan and house price in the short run. Moreover, a change in housing loan per se does not affect house price, neither does a change in house price per se affect housing loan in the short run. Thus, while there is long run equilibrium among housing loan, house price, interest rate and GDP, the causality direction between housing loan and house price is somewhat obscure. This implies that targeting housing loan as a means to control property price inflation in Singapore may not achieve the immediate desired result

Life Satisfaction among Elderly Households in Public Rental Housing in Singapore

We set out to investigate how satisfied the poor elderly Singaporean households in social housing are with their lives, especially in relation to their housing, in an attempt to find measures to improve, where possible, the life satisfaction of this group of elderly Singaporeans. We use archival and empirical research for our investigation. The results from 403 respondents to our survey are analyzed through logistic regression and factor analysis. We find that the life satisfaction of the elderly residents of social housing is very low. Furthermore we find that home modification that meets the requirements of the respondents will substantially improve their life satisfaction. Given that these elderly households neither have the right nor financial means to modify their housing units and precincts, it is incumbent upon the government, through the relevant authorities such as HDB, Town Councils and BCA to effect the necessary home modifications to create a more elderlyfriendly physical environment to improve the life satisfaction of the elderly households in social housing in Singapore. This arguably is a social imperative which should not be subjugated to economic niceties as social housing is not a luxurious housing choice but the last safety net for basic shelter

Green mark certification: does the market understand?

A corollary to the green building revolution is the certification of green buildings by relevant organizations. The pertinent question is whether the market understands the certification. The paper addresses the issue via a quantitative (hedonic model) and psychographic (survey) study of the Singapore residential green building market. The results reveal that green certification commands a statistically significant premium. However, the market is confused by the different tiers of certification as evidenced by incommensurate premia for the different tiers. Furthermore, the fact that the premium varies with tenure (freehold/ leasehold) and location after controlling for all other attributes may imply that the premium may not be solely attributable to green certification

Value versus growth real estate investment strategy: is the win a flash in the pan?

The superiority of the contrarian investment strategy, though well attested in the finance literature, is being questioned in some quarters on the pretext that the gap between the performance of value and growth investment narrows over time. If this is proven to be true, it would imply that value real estate investment may not be advisable given that real estate is a medium to long term investment. This paper uses empirical real estate investment return data from 1985Q1 to 2005Q3 for US, and some Asia Pacific cities to ascertain whether the superiority of "value" over "growth" real estate investment is a "flash" in the pan, i.e. unsustainable. The office, industrial and retail property investments are examined in the context of the value-growth paradigm, and complemented with mean reversion and stochastic dominance tests. In addition to confirming the relative superiority of "value" over "growth" property investment, the results show that office and industrial property investments exhibit return reversal. This implies that the "win" is sustainable. Although the returns from retail property investment display inertia, the results of stochastic dominance test validate the relative superiority of "value" over "growth" property investment for all the three sectors. This implies that fund managers who traditionally have been favoring prime (i.e. growth) property investment may have to reconsider their investment strategy if they want to maximize their return