Benchmark for REIT Performance in Malaysia Using Hedonic Regression Model

Abstract

This paper focuses on the setting of a benchmark for the REIT performance within the REIT industry to achieve a sector induced national REIT index for Malaysia. The study has as objectives to (i) explore literatures on performance and benchmarking; (2) appraise REIT performance analysis as presented in the past studies; and (3) propose Hedonic Regression Model analysis towards setting a benchmark for REIT. The study adopted the quantitative research and analysis method. Three conventional REITs were purposively selected to reflect diversity in portfolio and location. Data were extracted from the annual reports of Three (3) REIT companies (AmFirst REIT, Starhill REIT & AmanahRaya REIT) through their websites for period of five years (2008–2012). Hedonic regression was performed on the collected data from the REITs Company to forecast benchmark for the REITs based on individual capacity as reflected by the economic and operational indices. Thereafter the average of the return forecast for the three selected REIT represents an aggregate benchmark for the REIT industry in Malaysia. The study found that the M-REIT do outperform the KLCI but performed lower than the industry set return for 2013 by the study. The limitation of the study is two fold, first the sample for the study is small (3 out of the 12 conventional REITs) and secondly the study did not cover the Islamic REIT and there are 3 Islamic REITs in Malaysia. The identified limitations will be addressed in future research.