Performance Analysis of Reits: Comparison between M-Reits and UK-Reits

Abstract

Real Estate Investment Trusts or more commonly known as REITs is one of the investment tools that is renowned for the nature of low risk, low volatility, moderate returns, and high liquidity for investors. REITS invest primarily in real properties and tend to receive regular rental incomes from real properties owned and managed by the Trust. In most situations, it may be deemed as a stock by investors. However, the risk borne is lower and has less fluctuations in terms of market price of the stock. Moderate risk takers should consider REITS as one of the investments in their portfolio. REITS started emerging in many countries only recently. Since the successful of the performance of REITs in the United States, numerous countries started planning to enter the REITs regime. The United Kingdom was one of the recent countries to enter into the tax efficient REITs regime. This took place early in the year 2007. At the moment, it ranks fourth in terms of market capitalization based on the Global REITs report 2008. Malaysia, with a long history of Unit Trust Funds with some recently converting to REIT, has yet to achieve the size of UK-REITs. This research is to analyse the performance of six (6) selected REITs in both countries. Nevertheless, prior to the performance analysis, the mechanism as well as the legislation adopted in regulating the respective REITs regime is discussed. In addition, factors which contributed to the variance of performance of REITs are presented and further discussions are made based on the performance analysis done. The findings and analysis showed that the total revenue was the main factor affecting the performance for both the largest M-REITs and UK-REITs. Furthermore, has also demonstrated that for every billion increase in market capitalisation, the profit margins generated by the REITs will raise by approximately 9%.

The Impact of Operating Environment Factors on Reits’ Development and Performance in Nigeria

“…The market share of the N-REIT is 0.25% to 0.11% during the period in a diminishing pattern. The finding of a low performance REIT sector in Nigeria agreed to positive correlation between size and return (Alias and Soi Tho, 2011, Ambrose and Linneman, 2001, Brounen and Sjoerd, 2012 confirming the investment return principle of the higher the risk, the higher the return.…”

“…Their finding revealed a strong correlation between location attributes and REIT return. The argument is supported by the fact that REIT return is strongly determined by income from properties (Alias & Soi Tho, 2011;Gore & Stott, 1998;Hwa & Abdul Rahman, 2007). Any factor that affects property income will in turn affect REIT return.…”

Determinant Factors of Profitability in Malaysia’s Real Estate Investment Trusts (M-REITS)

“…According to Bursa Malaysia's website (http://www.bursamalaysia.com/market/derivatives/about-bursamalaysia-derivatives/about-us/company-profile), Bursa Malaysia is known as an exchange holding company approved under 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). Normally, the REITs companies can be relied on a group of people which is professionally managed by a manager who is a registered valuer in order to make all investment decisions.…”

“…Investors also seek to invest and own a share in REITs as it can be said to be less risky with indirectly own a property and able to provide high dividend yields. According to Alias and Soi (2011), the source of income generation for REITs comes from owning and operating real property that produces a good return of investment such as office buildings, shopping complexes and service apartments. Stocks in REITs can held privately or to be traded publicly on stock exchanges.…”

“…This type of property classification can be helpful to investors to analyse each of every REIT sector's performance. REITs can be considered as units of trust funds that are being managed by a professional body (Alias & Soi, 2011).…”