Liquidity of European Real Estate Equities: Reits and Reocs

Niskanen, Jaakko; Falkenbach, Heidi

doi:10.3846/1648715x.2011.587906

Cited by 12 publications

(9 citation statements)

References 29 publications

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“…Listed property is also credited for providing liquidity when included as part of a blended portfolio with private property and in most cases, its inclusion resulted in an improved performance (see Ametefe et al, 2019;Farrelly and Moss, 2014;Moss and Farrelly, 2015). At the regional front, much of the attention in the literature is aimed towards understanding the pan-European listed property market investment dynamics across a diverse range of themes, such as on the IPO performance (Ascherl and Schaefers, 2018), inflation hedging ability , liquidity issues (Moss and Lux, 2014;Niskanen and Falkenbach, 2012a), capital structure (Morri and Artegiani, 2015;Niskanen and Falkenbach, 2012b), implementation of leverage (Morri and Jostov, 2018), market volatility (Begiazi and Asteriou, 2016), futures contracts , amongst many other themes.…”

Section: Introductionmentioning

confidence: 99%

The evolution of Belgium REITs

Marzuki

Newell

2019

JPIF

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Purpose The Belgium Real Estate Investment Trust (REIT) market was created primarily to facilitate a transparent, professionally managed and fiscally efficient market, providing access to the European property markets. Being the 2nd oldest REIT market in Europe, it has undergone many evolutionary changes over the years that add to its considerable stature as a sophisticated investment opportunity. This includes an increased recent focus on the social infrastructure property sectors such as healthcare, care facilities and nursing homes, consistent with the evolving investment mandates requiring stronger integration of environmental, social and governance (ESG) aspects in the investment strategy formulation. The purpose of this paper is to highlight the strategic transformation of Belgium REITs and empirically assess their performance attributes over 1995–2018. Sub-period performance dynamics of Belgium REITs in the pre-global financial crises (GFC) (1995–2007) and post-GFC (2009–2018) contexts are provided. Design/methodology/approach In total, 23-year monthly total returns over 1995–2018 were used to analyse the risk-adjusted performance and portfolio diversification potential of Belgium REITs. The traditional mean-variance portfolio optimisation model using the ex-post returns, risk and correlation coefficient of Belgium REITs and other financial assets was developed to determine the added-value benefits of Belgium REITs in a diversified investment framework. The analysis was further extended to cover the sub-periods of pre-GFC (1995–2007) and post-GFC (2009–2018). Findings The results of the analysis provide a strong investment case for Belgium REITs, as they are able to deliver a discernible premium in the total return performance, superior risk-adjusted returns and strong diversification benefits with the stock market in a long-term investment horizon. Broadly consistent results are similarly observed in the sub-period analysis over varying market conditions. Importantly, the role of Belgium REITs in a diversified investment framework was also empirically validated, as they enhanced the mixed-asset portfolio performance comprised of the traditional asset classes of stocks and bonds across a broad portfolio risk-return spectrum. Dividend yield was also found to be a key component of the financial performance of Belgium REITs. Practical implications The Belgium REIT market has evolved to become the 5th largest market in Europe by the capitalisation volume. This is mainly due to the robust regulatory support and innovations since its debut which have resulted in a polished framework that is both supportive and attractive to financial players and investors. The broad direct consequence of this paper is to highlight the performance attributes of Belgium REITs, adding clarity to the ongoing discussion regarding the viability of European REITs as a liquid and tax transparent route for institutional investors to obtain their property exposure. The strong dividend yield and ESG/social infrastructure focus of Belgium REITs sees Belgium REITs well-placed going forward to meet the evolving investment mandates from major investors. Originality/value This paper is the first empirical investigation that elucidates the risk-adjusted performance and role of Belgium REITs as an important property investment opportunity. It equips investors and practitioners with an independent and comprehensive empirical validation of the strategic role of Belgium REITs in a portfolio. Well-informed and practical property investment decision making regarding the use of Belgium REITs for access to the property asset class is the main outcome of this paper.

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Section: Introductionmentioning

confidence: 99%

The evolution of Belgium REITs

Marzuki

Newell

2019

JPIF

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“…The growing significance of REITs in Europe has attracted considerable research interest, with previous empirical studies have covered major European REIT markets, both in the form of European-wide REIT market studies (e.g. Begiazi and Asterious, 2015; Morri and Artegiani, 2015; Niskanen and Falkenbach, 2010, 2012) and at individual European REIT markets such as German REITs (Newell and Marzuki, 2018), UK REITs (Baum and Devaney, 2008; Jadevicius and Lee, 2017; Newell and Marzuki, 2016; Pavlova et al , 2014), French REITs (Newell et al , 2013), Turkish REITs (Aktan and Ozturk, 2009; Erol and Tirtiroglu, 2011) and Bulgarian REITs (Kanaryan et al , 2015). Meanwhile, the literature on the Spain property market is centred mainly on the housing segment, revolving around issues such as price dynamics (De La Paz, 2014; De La Paz and McGreal, 2009; De La Paz and White, 2016; Gimeno and Martinez-Carrascal, 2010), social housing (Pareja-Eastaway and Sanchez-Martinez, 2017), property valuations (McGreal and De La Paz, 2012), property market bubbles (Akin et al , 2014) and determinants of cross-border property investment (Rodriguez and Bustillo, 2010).…”

Section: Introductionmentioning

confidence: 99%

The emergence of Spanish REITs

Marzuki

Newell

2018

JPIF

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Purpose Spanish real estate investment trusts (REITs) emerged as an important and rapidly expanding property investment vehicle, against the backdrop of improving Spain macro-economic fundamentals and commercial property market. This sees Spanish REITs being the 3rd largest REIT market in Europe, offering access to important Iberian and European property assets, with the added benefits of transparency, governance and liquidity. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of Spanish REITs in a mixed-asset portfolio over August 2014–February 2018. Design/methodology/approach Using monthly total returns, the risk-adjusted performance and portfolio diversification potential of Spanish REITs over August 2014–February 2018 are assessed. Asset allocation diagrams are used to assess the role of Spanish REITs in a mixed-asset portfolio. Findings Spanish REITs delivered strong risk-adjusted returns compared to stocks over August 2014–February 2018, but with limited portfolio diversification benefits. Compared to bonds, Spanish REITs offered competitive risk-adjusted returns and excellent diversification benefits. Importantly, this sees Spanish REITs as strongly contributing to the Spanish mixed-asset portfolio across the portfolio risk spectrum. Practical implications The 2012 Spanish REIT regulatory changes have been pivotal in providing a supportive environment for Spanish REITs’ growth. Spanish REITs are now a significant market in a European context. The results highlight the major role of Spanish REITs in a Spanish mixed-asset portfolio. The strong risk-adjusted performance of Spanish REITs compared to stocks sees Spanish REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as an increasing number of investors have utilised Spanish REITs to obtain their property exposure in a liquid format in recent years. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance of Spanish REITs, and the role of Spanish REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of Spanish REITs in a portfolio.

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“…Consistent with the theory of Howe and Shilling (1988), both Morri and Cristanziani (2009) and Niskanen and Falkenbach (2012), find that European REITs are significantly less leveraged than European RECs, i.e. REIT counterparts that are structured as typical limited liability companies and do not enjoy the tax-breaks available to REITs.…”

Section: Literature Reviewmentioning

confidence: 53%

The effect of leverage on the performance of real estate companies

Morri

Jostov

2018

JERER

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Purpose This paper aims to investigate the impact of leverage on the total shareholder return of European publicly traded real estate vehicles in three periods: Crisis Period (2007-2009), Rebound Period (2009-2014) and the Whole Period. Design/methodology/approach Cross-sectional analysis is used and the leverage effect on the performance is controlled for seven other independent variables (local market risk premium, size, book-to-market, short-term debt, cash); moreover, regional differences are accounted for. Findings It is established that during the Crisis Period, leverage levels are negatively associated with performance: this relationship also holds throughout the Whole Period, implying that for real estate securities, the cost of financial distress is larger than the potential gain from taxation, although the economic significance of it is limited. The Fama and French (1992) three factors, including size, book-to-market and local market risk premium, are found to be relevant, which is consistent with the literature. In addition, the UK and Sweden regions are identified as significant. Originality/value Even if there is sizeable body of literature on determinants of leverage and determinants of asset returns, little work has been done on how leverage affects the returns of European real estate companies. In addition, this paper takes advantage of observations from a full economic cycle and the possible effects of the crisis period.

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Liquidity of European Real Estate Equities: Reits and Reocs

Cited by 12 publications

References 29 publications

The evolution of Belgium REITs

The evolution of Belgium REITs

The emergence of Spanish REITs

The effect of leverage on the performance of real estate companies

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