Securities Commission of Malaysia defines REITs as ”an investment vehicle that proposes to invest at least 50% of its total assets in real estate, whether through direct ownership or through a single purpose company whose principal asset comprise real estate”. Shares of REITs company are publicly traded in major stock exchange and it is viewed as a good way for investors to own a property indirectly by owning the shares of the property. It would also be the only way for ordinary investors to have the opportunity to invest in large scale commercial properties. REITs usually generating income by owned and operating income producing real property such as offices, shopping centers and service apartments. Meanwhile it may invest in real estate-related securities, cash or fixed deposit and whole loans. However, most of the earning of a REIT company is produced from the recurrent rental incomes of the real properties owned. The unit holders of REITs will receive return in the form of dividends from the net income of the REITs generated. Due to the stable flow of incomes, it is considered as a lower risk investment tool to the investors. REITs are considered to be under the category of unit trust funds which are being professionally managed. The organisation structure is alike for both REITs and unit trust funds. Experienced real estate professional would be appointed as the management team of REITs which must be headed by a registered valuer to manage the investment and operations of REITs. It would be the same as unit trust funds where other than the management company, a professional fund manager will selects and manages the investment. The management team of REITs are accountable both to their board of directors as well as the shareholders of the REITs. REITs are viewed as the best combination of investment in real property and stocks. Investment in REITs by buying the shares of REITs would provide the investors a way to reduce loan and interest paid to own a property as investment. The return is indeed lower then stocks but would be more stable as it generates stable incomes to REITs. This is the unique of investing in REITs and awareness of this profit-driven investment tool is risen and promoting the growth of REITs in many countries. This investment tool has a long history in United State and Australia which had achieving stable market and growth over the past ten years. REITs had start becoming popular and achieving growth in many of the South East Asia countries in recent years, for instance, Singapore and Japan. REITs are considered as a new concept in Malaysia since 2005, which is the transformation from property trust fund. Securities Commission as the core regulator of all the unit trust funds and REITs are responsible in monitoring development of the industry. This statutory body had issue new guideline for REITs on the 3rd January 2005 to replace the old rule for Property Trust Funds. The issuance of the new guideline was indeed promoting the REITs due to the one level taxation.
The REITs market different from countries to countries, as well as the determinant factors of the performance of REITs in the specific market. Regulation may be the core factors in this context. Undeniably, other several factors for instance property market climate of the country may in fact influence the performance of the REITs for the country. REITs market was success in many several countries, especially United State which had matured in the REITs market. Many countries start introducing the REIT regime and putting effort to develop this industry as it was one of the valuable investment to the country. United Kingdom was one of the countries which were newly entered into the REIT regime. The REIT legislation was introduced by the United Kingdom government at the 1st of January, 2007. Interestingly, within two years of the operation, the UK REITs market had achieve to the ranking of forth in terms of their REITs market capitalisation, which was about US$ 41 million (Global REITs Report 2008, Earnst & Young). In fact, United Kingdom have their own way of REITs regulation, long period of time was used by the UK government in consultation to introduce the most suitable legislation for REITs. There are many other factors which may contribute to the a growth of REITs in UK. The different in managing their investment portfolio of REITS Company of United Kingdom and the implementation of some specific regulation for REITs in United Kingdom may be the underlying reasons for the growth of REITs. These factors which influenced the performance of UK-REITs will be explored in this study. Yet, before this could be carrying out, performance analysis will first be done to have better indicator of the following study. This study may explore the unique of the UK-REITS and simultaneously compare with Malaysia context for further recommendation.
To study the concept, mechanism and regulation of REITS in Malaysia and United Kingdom To analyze and compare the performance of the selected REITS of Malaysia and United Kingdom To identify the factors which contribute to the variant of performance as to the M-REITS and UK-REITS.
This study will be focused on the performance of M-REITS and UK-REITS. Three largest REITS of both countries will be chosen for the performance analysis. The REITS company chosen must also be listed in their respective stock market, i.e. be listed in Bursa Malaysia for M-REITS and London Stock Exchange for UK-REITS. The collection of data for this study lay between the timeframe of 2007 to 2009. This is due to the reason that REITs of United Kingdom was introduced on the 1st of January 2007.
Quantitative method will be adopted as the research methodology. Relevant statistics, graphs, charts obtained will be analyzed in order to compare the variant performance of the selected REITs in UK and in Malaysia. The data can be extracting from the annual report of the REITs company, Bursa Malaysia, London Stock Exchange and online database. Secondary sources will be considered as well, for instance, articles, journals, research papers, reference books and the guidelines for REITs published by the Securities Commission in Malaysia context and the guidelines and regulation in United Kingdom context.
This study intended to benchmark the performance of REITs in Malaysia with United Kingdom. Through the analysis, improvements in terms of property portfolio management, regulation and investment direction could be done to achieve better performance of Malaysia REITs market. Investors as well as the managers of the REITS industry may benefit from this study which provides detail information and performance of selected REITS. Investors may have better information of the REITs market whether in Malaysia or United Kingdom, which may help while making decision of the investment in any REITs. Furthermore, the mechanism and regulation of REITS discussed in literature review will benefit new investors of REITS.
This study will be focus on three largest REITS of both Malaysia and United Kingdom. The analysis could only be done for a limited number of REITS due to time constraint. Complexities and diversities could be reduced significantly while limited to few numbers of REITs. This study would also limit to the selected listed M-REITS and UK-REITS as at 31st December 2009.
In first chapter, a brief introduction of the topic of research is given. The background of the research is introduced by explaining the reasons of choosing this topic as research topic. Subsequently, the statement of research problems, objectives of the study, scope of the study, research methodology, significance of the study, limitation of the study and structure of the study are identified and explained in sequence in chapter 1. Second chapter will be the literature review of the research topic. Journals, articles, reference books will be using as sources of the literature review for further understanding of the REITs market and mechanism as in United Kingdom context. Detail of the REITs related rules will be discussed in detail for both Malaysia and United Kingdom. The third chapter will explained the methodology of this research. The types and sources of data to be collected will be specified in details. Furthermore, the terms used in analyzing the performance of REITS will be identified and elaborated explicitly. Chapter four is the presentation of the analysis of findings and discussion. The performance and the property portfolio of the selected REITs will be analyzed. The background of the REITs company will be analyzed as well for further understanding of the nature of the selected REITs. Comparison study will later presented between REITs of Malaysia and REITs of United Kingdom. Finally, chapter 5 will be the conclusion of the study based on the analysis done. The arguments which arisen throughout the research will be summarized. In addition, suggestions and recommendations will be given for further research purposes.
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