REIT and Financial Innovations
The emergence of Real Estate Investment Trusts (REITs) has created ample opportunities for retail investors to invest in commercial real estate. After the first REIT listing on the Singapore Exchange in 2002, the capitalization of Singapore’s REIT (SREIT) market has grown by multiples to more than US$70 billion, as of 2019. The SREIT market is now the second largest REIT hub in Asia after Japan; and one that is most diversified in terms of the REIT assets by geographical sector.
Unlike the U.S. REITs that are mostly internally advised, the SREIT model is predominantly externally advised. Close affiliation to a sponsor is also a unique feature for many SREITs, and thus studies that use SREIT data could add diversity to the literature. IREUS conducts research into issues on interactions between different asset markets using time series data to studies on asset management fee structure, capital structure, and asset growth strategies that use micro-level data.
Current Research Projects
IREUS is currently constructing various return indices and using the indices to estimate risk premiums for the purposes of performance benchmarking of SREITs. The new indices and risk premium information could enhance information transparency of the SREIT market, and position SREITs as one of the most progressive REIT markets in Asia. IREUS engages the REIT industry via regular dialogues and roundtable sessions with industry leaders and partners.
- SREIT Return Indices and Risk Premiums (attached slides)
The research team constructs monthly return indices and various sub-indices by market capitalization, real estate asset sector, sponsor-affiliation, and composition of real estate portfolio by geographical location; and then estimates cross-section risk premiums for SREITs using data in a 3-year rolling window period.
A REIT Roundtable Seminar was conducted in collaboration with KPMG on 3 May 2019 to solicit feedback on the preliminary findings from key industry leaders.
b. Asset Management Fee Structure of SREITs (attached slides)
The research team surveys the fee structures for asset managers of SREITs and compare different fee models across SREITs. There are different fee models consisting of a base fee and a performance fee that are adopted by SREITs. The base fees are computed using either value of deposited properties or annual distributable income; whereas the performance fees can be pegged to other indicators such as distribution per unit (DPU), net property income other than the two same measures used for the base fee computation. More research will be conducted to study different fee structure across different industry sectors, and also across different REIT markets, and examine if asset managers’ fees commensurate with efforts and values added by asset managers.
A REIT Roundtable Seminar was conducted in collaboration with WongPartnership LLP on 15 March 2019 to exchange views on the findings with key industry leaders.
Media Coverage
“REIT 资产组合应分散或集中？”, 联合早报, 新加坡财经, 财经特稿, 1 October 2017, (SING Tien Foo 程天富and CHIA Liu Ee 谢柳依)
https://www.zaobao.com.sg/zfinance/invest/story20171001-799538
“亚洲房地产信托基金市场的崛起，“ 联合早报, 新加坡财经, 财经特稿, 10 August 2017, (SING Tien Foo 程天富)
Selected Publications
Chiang M-C, Sing TF, and Tsai I-C. 2017. Spillover Risks in REITs and other Asset Markets. Journal of Real Estate Finance and Economics 54 (4): 579-604.
Li Q, Sun H, and Ong SE. 2006. REIT Splits and Dividend Changes: Tests of Signaling and Information Substitutability. Journal of Real Estate Finance and Economics: 127-150.
Ling DC, Ooi JT, and Xu R. 2016. Asset Growth and Stock Performance: Evidence from REITs. Real Estate Economics.
Ooi JT, Mori M, and Wong WC. 2018. Rationale Behid IPO Pricing: Evidence from Asian REIT IPOs. Real Estate Economics 47 (1).
Sing TF, Tsai I-C, and Chen M-C. 2016. Time-Varying Betas of US REITs from 1972 to 2013. Journal of Real Estate Finance and Economics 52 (1): 50-72.
Tang CK, Mori M, Ong SE, and Ooi JT. 2016. Debt Raising and Refinancing by Japanese REITs: Information Content in a Credit Crunch. Journal of Real Estate Finance and Economics 53 (2): 141-161.
Xu R, and Ooi JT. 2018. Good Growth, Bad Growth: How Effective are REITs' Corproate Watchdogs? Journal of Real Estate Finance and Economics 57 (1): 64-86.
Working Papers
Lim KG, and Sing TF. 2019. Leverage Strategies of REITs and Real Estate Operating Companies.
Seah KY, Shilling JD, Sing TF, and Wang L. 2019. 'REITalization' Effects on Global Real Estate Investments.
Zhang F, Badarinza C, and Ooi JT. 2019. CEO Tenure and Far-sighted Acquisitions.
Research Team
CHOW, Yuen Leng
OOI, Joseph TL
ONG, Seow Eng
SING, Tien Foo
TAN, Sonny Hock Sun