The potential of Malaysian REITs’ property type allocation

Abstract

The aim of this study is to explore the potential of property type allocation in Malaysian real estate investment trusts (M-REITs) portfolio and examining the advantages and disadvantages of property type diversification in REITs portfolio. Employing a ten year REITs’ data traded in Bursa Malaysia (BM) from year 2006 until 2015 and used descriptive analysis, this study describe distribution of M-REITs’ financial performance of size of market capitalization (MktCap), performance of total return index (TRI), dividend per unit (DPU) and dividend yield (DY). Whereas, the portfolio allocation through property type identified as office space, commercial mall, industrial building, hotel & resort and specialized property. This study reveal that larger portion of PTCM in M-REITs property allocation that was influenced by the economic situation and M-REITs tend for being specialized property type market concentration strategy compared of being diversified property type strategy. Nevertheless the allocation of commercial mall is growing bigger throughout the period, but experienced decrease in trend of average dividend yield (ADY), puzzled and indicated that the revenue from PTCM do not performed according to the market value of the property. The PTCM in term of size and property portfolio allocation had come into dis-economics of scale, which increase of growth of firm size not in tangent with growth of average DY of M-REITs. Therefore, the quality of property being brought in the M-REITs property portfolio and the style of M-REITs advisory management upon REITs’ property acquisition requires further explanation.