Wan Norhishamuddin Wan Rodi, Adi Irfan Che-Ani, Norngainy Mohd Tawil, Kien Hwa Ting and Fatin Aziz
The rising awareness of the significance of protecting the environment and reducing the carbon footprints of buildings has led to the development of sustainable or green office…
Abstract
Purpose
The rising awareness of the significance of protecting the environment and reducing the carbon footprints of buildings has led to the development of sustainable or green office buildings that are believed to be more energy-efficient and environmentally friendly. Despite this, not many have studied the extent of impacts between green classification and rental depreciation in Malaysia, besides the other traditional causes. Therefore, the primary purpose of this study is to identify the relationship of building characteristics and location factors, namely, green building classifications (BCLs), location and site (LOT), building engineering and services (BES) and building appearance and design (BAD) that contribute to rental depreciation in the Golden Triangle Area of Kuala Lumpur.
Design/methodology/approach
A survey using a questionnaire was used in the data collection targeting the selected Kuala Lumpur commercial purpose built office building property managers. To establish the significance and relevance of the model, this study employed the PLS algorithm and bootstrapping procedures.
Findings
This research suggests that there were significant impacts of LOT, BAD, and BES towards rental depreciation. On the contrary, sustainable classifications were found insignificant towards rental depreciation.
Originality/value
The novelty of this study is that it proposes the sustainable classifications as one of the components in analysing the commercial property depreciation.
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Wei Lan Chong, Kien Hwa Ting and Fan Fah Cheng
The purpose of this paper is to examine the impact of free cash flow (FCF) on the agency costs and how these FCF and agency costs affect the performance of REITs in Asia. Unlike…
Abstract
Purpose
The purpose of this paper is to examine the impact of free cash flow (FCF) on the agency costs and how these FCF and agency costs affect the performance of REITs in Asia. Unlike previous studies that focus on conventional public listed companies and non-regulated industry, the Asian REIT industry being a highly regulated industry provides a new context for further research.
Design/methodology/approach
The samples for this study comprise REIT data from four major Asian REIT countries, namely, Japan, Singapore, Hong Kong and Malaysia. These countries are the leaders in Asian REITs which account for 94 percent of the total market capitalization of REITs in Asia. The study period is from 2002 to 2012 using panel data. This study employs GMM method which is more robust compared to previous studies that used pooled ordinary least squares (OLS) and other panel data methods.
Findings
The results indicate that FCF and agency costs persist over time in Asian REITs even though REITs are in a highly regulated industry. The findings also imply that REIT managers face substantial costs when they wish to adjust to the equilibrium level of agency costs, whereby the optimum level is always dynamic and not constant over time and moves with the changes in the determinants of agency costs. These agency costs persist over time and have significant impacts on the performance of REITs in Asia.
Research limitations/implications
There are limited data in selling, general and administrative expenses in Asian REITs which render only limited use of selling, general and administrative expenses ratio in this empirical study on Asian REITs. For future research, researchers can embark on research studies on issues that might determine the speed of adjustment toward the equilibrium level of agency costs in Asian REITs.
Practical implications
For REIT regulators in Asia, this empirical study helps to provide useful information for policy planning and formulation in REIT corporate governance; and to transform the inherent satellite structure of the externally managed REIT structure into internally managed REIT structure. For REIT managers and practitioners, this empirical study serves as a reflection for them which helps them to be more aware of the dynamism of FCF and agency costs in REITs; and alert them that these FCF and agency costs persist over time which can have significant impacts on the REIT performance, return on assets and return on equity, REIT value and REIT return, respectively in Asia. Thus, they could consider internalizing their REIT management structure for better and more efficient management in REITs in order to mitigate the agency costs that are persistent over time. As a whole, this empirical study contributes significant benefits to all level of the REIT industry in Asia.
Social implications
This implies that the REITs in Asia should consider internally managed REIT structure since the agency costs persist over time and there are always dynamic and not constant over time and moves with the changes in the determinants of agency costs. The findings also imply that the regulators in Asian REITs should enforce absolute stringent corporate governance rules and regulations in order to govern the existing inherent satellite structure of the externally managed REITs in Asia.
Originality/value
This empirical study contributes significant benefits to all levels of the REIT industry in Asia and the current limited literature on Asian REITs by examining the impact of FCF and agency costs on the performance of REITs in Asia. This is the first research to embark on FCF and agency costs on REITs in Asia. Furthermore, this study employs GMM method which is more robust compared to previous studies that used pooled OLS and other panel data methods.
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The purpose of this paper is to examine the stock price reactions to the announcements of corporate real estate acquisitions by listed non‐property companies in Malaysia and…
Abstract
Purpose
The purpose of this paper is to examine the stock price reactions to the announcements of corporate real estate acquisitions by listed non‐property companies in Malaysia and whether acquisitions under different economic conditions lead to different share price reactions.
Design/methodology/approach
This research applies the event study approach.
Findings
It is found that the cumulative abnormal returns associated with the property acquisitions differ significantly in different economic conditions. Price reaction for property acquisitions before the Asian financial crisis is consistent with the normal investor expectations of increasing shareholder value. However, property acquisitions during and after the crisis have negative wealth effects.
Research limitations/implications
The research is limited in that it has considered only the Asian financial crisis. Further research might explore the impact of other forms of economic conditions on wealth effects of corporate real estate acquisitions.
Practical implications
The research clearly identified the need to consider economic conditions as a factor affecting wealth effects of property acquisitions. The findings of this study are useful to decision makers of multinational companies which have significant corporate real estate investments in China, India and developing countries.
Originality/value
The paper argues that the wealth effect of corporate real estate acquisitions is affected by economic condition.
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To examine the stock price reactions to the announcements of corporate real estate disposals by listed non‐property companies in Malaysia and whether disposals under different…
Abstract
Purpose
To examine the stock price reactions to the announcements of corporate real estate disposals by listed non‐property companies in Malaysia and whether disposals under different economic conditions lead to different price reactions.
Design/methodology/approach
This research applies the event study approach.
Findings
It is found that the cumulative abnormal returns associated with the property disposals differ significantly in different economic conditions. Price reaction for property disposals before the Asian financial crisis is consistent with the normal investor expectations of increasing shareholder value. However, property disposals during and after the crisis have negative wealth effects.
Research limitations/implications
The research is limited in that it has considered only the Asia financial crisis. Further research might explore the impact of other forms of economic conditions on wealth effects of corporate real estate disposals.
Practical implications
The research clearly identified the need to consider economic condition as a factor affecting wealth effects of property disposals. The findings of this study are useful to decision makers of multinational companies which have significant corporate real estate investments in China, India and developing countries.
Originality/value
The paper argues that the wealth effect of corporate real estate disposals is affected by economic condition.
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Acquisitions of properties are carried out by corporate firms for development, investment and operational uses. Acquisitions of corporate real estate announced by listed…
Abstract
Purpose
Acquisitions of properties are carried out by corporate firms for development, investment and operational uses. Acquisitions of corporate real estate announced by listed non‐property companies are found to have positive stock price reactions. This paper seeks to identify the reasons why acquisitions of corporate real estate are a positive net present value (NPV) investment to the acquiring firms.
Design/methodology/approach
This paper draws theoretical explanations from real estate and finance literature to identify the reasons for the acquisitions to be positive NPV investments to non‐property listed companies.
Findings
The sources of gains in property acquisitions are worth, marriage value and business synergy. These explanations provide the reasons why the announcement of property acquisitions by listed companies could lead to positive wealth gains in the capital market.
Originality/value
This paper offers the explanations behind the positive stock price reactions upon the announcements of corporate real estate acquisitions.
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Chyi Lin Lee and Kien Hwa Ting
Previous studies on the Malaysian securitised real estate market have largely emphasised on performance analysis, whereas the importance of securitised real estate in asset…
Abstract
Purpose
Previous studies on the Malaysian securitised real estate market have largely emphasised on performance analysis, whereas the importance of securitised real estate in asset allocation is largely ignored. Therefore, the purpose of this paper is to examine the role of Malaysian property shares and real estate investment trusts (REITs) in a mixed‐asset portfolio from 1991 to 2006.
Design/methodology/approach
The mean‐variance and downside risk optimisations were utilised to assess the role of REITs and property shares in a mixed‐asset portfolio allocation. More specifically, the portfolio diversification potential and return enhancement benefits for both assets were examined.
Findings
The results showed that property shares offer little diversification benefits or portfolio return enhancement, whereas the equally weighted REITs portfolio does provide some diversification benefits and return enhancements under the mean‐variance and downside risk frameworks. However, the benefits have diminished in recent years. Besides, the results also revealed that the equally‐ and value‐weighted REIT portfolios do behave differently.
Research limitations/implications
This study has several important implications for investors. Importantly, investors should consider the inclusion of REITs rather than property shares in their portfolios.
Originality/value
This paper is one of few studies in emerging markets, although Malaysia was the first country to introduce REITs in Asia. Additionally, it could be the first attempt to assess the downside risk of Malaysian securitised real estate.
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Jayalakshmy Ramachandran, Khoo Kok Chen, Ramaiyer Subramanian, Ken Kyid Yeoh and Kok Wei Khong
This study aims to investigate the relationship between corporate governance (CG) and performance of Real Estate Investment Trust (REITs) in Singapore and Malaysia.
Abstract
Purpose
This study aims to investigate the relationship between corporate governance (CG) and performance of Real Estate Investment Trust (REITs) in Singapore and Malaysia.
Design/methodology/approach
The 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.
Findings
All 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/implications
All 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 implications
Findings 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/value
Due 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.