EFFECTS OF PROPERTY ACQUISITION AND NEW LISTING OF REAL ESTATE INVESTMENT TRUSTS

Abstract

After a prolonged period of gestation and lobbying, the idea of introducing real estate investment trusts (REITs) in Singapore finally cleared the regulatory hurdle when guidelines for the formation of REITs were finally released by the Monetary Authority of Singapore on May 14, 1999. Although two years have elapsed since the guidelines were released, no Singapore REITs have been launched until the recent unsuccessful floatation of the Singmall property trust (SPT) by Capitaland. It is commented that the launch of a new property trust will help to improve the performance of property stocks in this lackluster market. This study is aimed at examining the effects of listing of new property trusts on property stocks returns. Due to insufficient demand arising from a generally poor investment climate and a large supply of Singapore corporate bonds in the market, SPT listing was not successful. The author made use of two announcement dates of property trusts, which were listed during the past one decade to analyze the impact of the newly listed property trusts on the property stocks listed on the KLSE. Property companies usually engage in acquisitions as part of their growth and diversification strategy. No studies have been done thus far in Malaysia on the effects of new acquisition announcements of property assets. Most of the researches focused on mergers and spin-off by both property and non-property firms. Hence, based on the data collected, the author decided to study the announcement effects of acquisition of property assets on property shares and property trusts listed on KLSE. After a review of the literature germane to the study and conduct event study methodology for 2 announcements on the launch of property trusts and 8 announcements of property trusts' and property companies' acquisition. The hypothesis tests on returns at a 5% level of significance show that the announcement effect is statistically insignificant in the short run. However, a lagging effect is observed in the long run as the impact of acquisition announcements was found to be statistically significant at 5% level over a longer period.