INDUSTRIAL S-REITS PROPERTY DIVESTMENT LIKELIHOOD AND DRIVING FACTORS

Abstract

Since the first inception of Singapore Real Estate Investment Trust (S-REIT) in year 2002, the S-REIT market has grown to become a global REIT hub comprising 43 listed S-REITs and a total market capitalisation of over S$100 billion as of 2020. Over the last decade, the industrial S-REIT landscape has witnessed over 55 divestments with transacted amount exceeding S$2.1 billion.

Limited S-REIT divestment literature exists, with most focusing solely on its associated wealth effects and performance. As such, the research paper aims to investigate the property divestment likelihood of industrial S-REITs and the accompanying motivations so as to address the gaps in current literature. Following the divestments, the paper also aims to investigate the possible wealth effects of the divestment announcements. The period of study is from January 2019 to December 2019 and covers both local and overseas divestments.

We first investigated the possible factors affecting divestment likelihood on a portfolio level and found that smaller industrials S-REITs with higher dividend yield are more likely to divest. Expanding on the Probit model utilised for the first investigation, property level characteristics relative to portfolio were incorporated to test for correlation but little evidence was found. Finally, an event study was conducted to investigate the possible wealth effects of divestment announcements and results showed positive significant abnormal shareholder returns around the divestment announcement date.