The value-added role of sector-specific REITs in Australia

Lin, Yu Cheng; Cho, Hyunbum; Lee, Chyi Lin

doi:10.1080/14445921.2019.1610593

Cited by 7 publications

(9 citation statements)

References 30 publications

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“…Further, following Lin et al (2019a, b) and Marzuki and Newell (2019), a constrained portfolio analysis was used to constrain the REIT allocation at a maximum level of 20% in the mixed-asset portfolio. This reflects the typical actual total property allocation in institutional investor portfolios.…”

Section: Methodologiesmentioning

confidence: 99%

“…Whilst composite REITs have attracted major property investor interest, few studies have focussed on single REIT sub-sectors. This is despite the fact that numerous studies have acknowledged the existence of the sectoral effect in which different property sectors feature different property cycles (Benefield et al , 2009; Yavas and Yildirim, 2011; Hoesli et al , 2015; Lin et al , 2019a). Several studies have examined office REITs (Bohjalian, 2018), retail REITs (Newell and Peng, 2007), residential REITs (Newell and Fisher, 2009; Lin et al , 2019b), storage REITs (Bohjalian, 2018), lodging REITs (Jackson, 2009), Islamic REITs (Razali et al , 2015) and alternate REIT sectors (Peng and Newell, 2007; Marzuki and Newell, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, no comparable study has yet been devoted to the investment opportunity for I&L REITs in the Pacific Rim region, while the opportunities for composite REITs have been widely discussed (Ong et al , 2011; Lee and Lee, 2014; Newell, 2012; Ling et al , 2018; Liow et al , 2019). Given the sectoral effect acknowledged by numerous studies (Benefield et al , 2009; Yavas and Yildirim, 2011; Hoesli et al , 2015; Lin et al , 2019a), few studies have focussed on the investment performance of sector-specific REITs (Newell and Peng, 2007; Newell and Fisher, 2009; Lin et al , 2019a, b). Importantly, no detailed assessment of I&L REITs has been documented, notwithstanding the Pacific Rim–based I&L REIT market having grown significantly in recent years.…”

Section: Introductionmentioning

confidence: 99%

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The added-value role of industrial and logistics REITs in the Pacific Rim region

Lin

Lee

Newell

2020

JPIF

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PurposeAs significant listed property investment vehicles, industrial and logistics REITs (I&L REITs) have recently enhanced their property portfolios, often replacing the traditional industrial properties with logistic properties to gain strategic exposure to recent e-commerce trends. This paper aims to assess the investment performance of I&L REITs by assessing the significance, risk-adjusted performance and portfolio diversification benefits of I&L REITs in the Pacific Rim region from July 2011 to December 2018. The strategic property investment implications for I&L REITs are also identified.Design/methodology/approachMonthly total returns from July 2011 to December 2018 were used to analyse the risk-adjusted performance and portfolio diversification benefits for I&L REITs in the United States, Japan, Australia and Singapore. An asset allocation diagram was employed to assess the strategic role of I&L REITs in a mixed-asset portfolio in each case.FindingsI&L REITs generally possessed superior average annual returns compared with the other sub-sector REITs, stocks and bonds in the United States, Japan, Australia and Singapore between July 2011 and December 2018, with desirable portfolio diversification benefits. Importantly, a more significant role for I&L REITs was generally observed in the mixed-asset portfolio compared to the other sub-sector REITs in each of these four markets across the broad portfolio risk spectrum. This reflects I&L REITs delivering enhanced portfolio returns and offering portfolio diversification benefits in a mixed-asset portfolio in the United States, Japan, Australia and Singapore.Practical implicationsProperty investors, particularly property securities funds (PSFs) and income-oriented investors, should consider including I&L REITs in their mixed-asset portfolios, as Pacific Rim–based I&L REITs provided an attractive REIT investment sub-sector, co-existing alongside the other sub-sector REITs and major asset classes in a mixed-asset portfolio in a Pacific Rim context, as well as being a portfolio diversifier. These results confirm the added-value and strategic role of I&L REITs in a mixed-asset portfolio, seeing I&L REITs as an effective investment pathway for I&L property exposure in the Pacific Rim region.Originality/valueThis is the first study to assess the investment performance of I&L REITs in the Pacific Rim region, evaluating their significance, risk-adjusted performance and portfolio diversification benefits, and the role of I&L REITs in a mixed-asset portfolio in the United States, Japan, Australia and Singapore. More importantly, this research is the first paper to provide empirical evidence on I&L REITs, which have often transformed their traditional industrial property portfolios with increased levels of logistics property to gain exposure to recent e-commerce trends. This research enables more informed and practical property investment decision-making regarding I&L REITs and their added-value and strategic role in a mixed-asset portfolio, as well as delivering effective I&L property exposure in the Pacific Rim region, with the added benefits of liquidity, transparency and fiscal efficiency.

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Section: Methodologiesmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The added-value role of industrial and logistics REITs in the Pacific Rim region

Lin

Lee

Newell

2020

JPIF

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“…Although specialisation offers a higher level of flexibility and emerges as the preferred REIT structure among investors, consensus on firm specialisation assertion value in REITs in the international context has yet to be reached (Eichholtz et al, 2000;Benefield et al, 2009;Ro and Ziobrowski, 2011;Lin et al, 2019a). Whilst studies have mainly focused on the investment performance of REITs before the Global Financial Crisis (GFC), no comparable study has focused on the interest rate risk dimension of this issue in the post-GFC context.…”

Section: Introductionmentioning

confidence: 99%

Varying interest rate sensitivity of different property sectors: cross-country evidence from REITs

Lin

Lee

Newell

2021

JPIF

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PurposeRecognising that different property sectors have distinct risk-return characteristics, this paper assesses whether changes in the level and volatility of short- and long-term interest rates differentially affected excess returns of sector-specific Real Estate Investment Trusts (REITs) in the Pacific Rim region between July 2006 and December 2018. The strategic property risk management implications for sector-specific REITs are also identified.Design/methodology/approachDaily excess returns between July 2006 and December 2018 are used to analyse the sensitivity in the level and volatility of interest rates for REITs among office, retail, industrial, residential and specialty REITs across the USA, Japan, Australia and Singapore. The generalised autoregressive conditionally heteroskedastic in the mean (GARCH-M) methodology is employed to assess the linkage between interest rates and excess returns of sector-specific REITs.FindingsCompared with diversified REITs, sector-specific REITs were less sensitive to short- and long-term interest rate changes across the USA, Japan, Australia and Singapore between July 2006 and December 2018. Of sector-specific REITs, retail and residential REITs were susceptible to interest rate movements over the full study period. On the other hand, office and specialty REITs were generally less sensitive to changes in the level and volatility of short- and long-term interest rate series across all markets in the Pacific Rim region. However, the interest rate sensitivity of industrial REITs was somewhat mixed. This sector was sensitive to interest rate movements, but no comparable evidence was found since the onset of GFC.Practical implicationsThe insignificant exposure to interest rate risk of sector-specific REITs may imply that they have a stronger interest rate risk aversion and greater hedging benefits than their diversified counterparts, particularly for office and specialty REITs. The results support the existence of REIT specialisation value in the Pacific Rim region from the interest rate risk management perspective. This is particularly valuable to international property investors constructing and managing portfolios with REITs in the region. Property investors are advised to be aware of the disparities in the magnitude and direction of sensitivity to the interest rate level and volatility of REITs across different property sectors and various markets in the Pacific Rim region. This study is expected to enhance property investors' understanding of interest rate risk management for different property types of REITs in local, regional and international investment portfolios.Originality/valueThe study is the first to assess the interest rate sensitivity of REITs across different property sectors and various markets in the Pacific Rim region. More importantly, this is the first paper to offer empirical evidence on the existence of specialisation value in the Pacific Rim REIT markets from the aspect of interest rate sensitivity. This research may enhance property investors' understanding of the varying interest rate sensitivity of different property types of REITs across the USA, Japan, Australia and Singapore.

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“…Hence, rational investors are careful not to expose their investment funds to erosion by inflation. There are several theoretical and empirical studies on Real Estate Investment Trust (REIT) in terms of its returns, risk-adjusted and diversification performance in especially developed economies (Lin et al, 2019;Salisu et al, 2020). However, there is a dearth of literature on the inflation-hedging characteristics of African REITs.…”

Section: Introductionmentioning

confidence: 99%

Do REITs Hedge against Inflation? Evidence from an African Emerging Market

Dabara¹,

Gbadegesin²,

Amidu³

et al. 2021

The Future of the African Real Estate Sector: What Next? The 20th Annual AfRES Conference

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Purpose -This study examines how returns on Nigerian REIT (N-REIT) behave in relation to inflation changes from 2008 to 2019 to provide information for investment decisions.Design/Methodology/Approach -Eleven years monthly return data from 2008 to 2019 were collected from databases and annual reports of the three active REITs in Nigeria. Inflation rates covering the study period were collected from the Central Bank of Nigeria's database. The authors adopt the Fama and Schwert model, an extension of the Fisher hypothesis, to test N-REIT's inflation-hedging capability.Findings -The empirical results suggest that N-REIT has perverse hedging-characteristics (poor inflation hedges) across all inflation exposures (actual, expected, and unexpected). The Engle-Granger causality tests conducted corroborates these results.Practical Implication -This study reveals the peculiar nature of Nigerian REITs in relation to inflation, which could have profound investment implication for domestic and foreign investors.Originality/Value -This study is one of the first to empirically analyse the inflation-hedging characteristics of REITs in the second-largest African REIT market (N-REIT).

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The value-added role of sector-specific REITs in Australia

Cited by 7 publications

References 30 publications

The added-value role of industrial and logistics REITs in the Pacific Rim region

The added-value role of industrial and logistics REITs in the Pacific Rim region

Varying interest rate sensitivity of different property sectors: cross-country evidence from REITs

Do REITs Hedge against Inflation? Evidence from an African Emerging Market

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