A LIFECYCLE PERSPECTIVE ON DISTRIBUTION PER UNIT OF S-REITS

Abstract

The primary interest of this research aims to explore 1) the DPU and DPU/Total Assets trajectory across the tracking period, 2) the impact of life cycle on DPU and DPU/Total Assets, 3) the impact of sponsor ownership on DPU and DPU/ Total Assets across time and 4) extension of study on life cycle using capital renewal age ‘CAPN’ as the proxy. These research objectives are achieved by a cross-sectional study of S-REITs over the tracking period from Q3 2003 to Q3 2013 (ten years period), using the following methods - Panel Data Regression (proxy using months from IPO) and Paired Samples T-Tests (proxy using ‘CAPN’). In consolidating the results, there is a divergence in key findings on the relationship between DPU and life cycle of S-REITs using panel data regression and ‘CAPN’. Given the weaker representation of sample used for the extension study, the results from panel data regression would be take precedence. It is thus concluded that as S-REITs transits into the maturing phase of life cycle, there will be a downwards pressure on DPU, which coincides with the decreasing trend of DPU/ Total Assets found by using both methods. The decreasing DPU/ Total Assets trend would signify the increasing ineffectiveness of acquisition strategy across time in growing DPU. In testing for the impact of sponsor ownership, it is established that S-REITs with low sponsor ownership delivers higher DPU than that of high sponsor ownership; however, while S-REITs with low sponsor ownership has higher DPU/ Total Assets relative to the group with high sponsor ownership, it is less effective in growing DPU through growth strategy as it sails through the life cycle. There is also a persistent theme of diminishing marginal returns in both methods utilised for DPU and DPU/ Total Assets, which saw a higher significance for DPU/ Total Assets. This phenomenon links up with the analogy of a running an up-slope, whereby it is natural for energy level to deplete at some point in time. In attempts to inject new insights, analyses by real estate sectors and identification of outperformers and underperformers by REIT and sectors are included to enrich the understanding of the impact of life cycle on S-REITs.