Paper to be presented at the Asian Real Estate Society (AsRES) Conference, Seoul, Korea, July 2002
Real Estate Market Reaction to Public Listings and Acquisition News of Malaysia REITs Sing, Tien Foo* Email:
[email protected] & Ho, Kim Hin David Email:
[email protected] & Mak, Mei Fong Evelyn Department of Real Estate National University of Singapore 4 Architecture Drive Singapore 117556 Date: 18 May 2002 Abstract: Real estate investment trust (REIT), or property trust, is a relatively new instrument that was first listed in 1989 in Malaysia. This study aims to test the market reactions of Malaysia’s property trusts and property stocks to corporate restructuring activities such as acquisition and new listing. Our tests of the price behaviour of 58 listed property stocks and 3 property trusts associated with the announcement of the new listing of Mayban Property Trust Fund One (MPTF1) in 1997 showed that property stocks and property trusts prices reacted significantly with a negative abnormal return of 2.29% and 4.86% respectively during an interval of 10 days before the new listing announcement. Prices were adjusted upward in the post-listing periods over a period of 5 days. In the tests of the acquisition announcement of 22 property stocks and 2 property trusts, the results showed no significant excess returns accumulated in the property stock market around the event window intervals. For property trusts, there were significant negative price adjustments of 8.2% and 1.95% during the event intervals [-10,0] and [-1,0] respectively. The two securitized real estate markets do not perfectly share or response to the same set of information concerning corporate restructuring activities. This implies that institutional investors with portfolio comprising property trusts and property stocks could still achieve diversifications associated with unsystematic market shocks. Keywords: New Listing, Acquisition Announcement, Event Study, Property Stocks and Real Estate Investment Trusts
*
Correspondence please forward to the first author by email at
[email protected], or by mail at Department of Real Estate, National University of Singapore, 4 Architecture Drive, Singapore 117566. Comments are welcome.
Real Estate Market Reaction to Public Listings and Acquisition News of Malaysia REITs 1.
Introduction
Real estate investment trusts (REITs) or more popularly known as property trusts in Malaysia were first listed on the Kuala Lumpur Stock Exchange (KLSE) of Malaysia in 1989. As at today, there are four-listed property unit trusts on the KLSE. The property trusts are Arab-Malaysian First Property Trust (AMFPT), Mayban Property Trust Fund One (MPTF1), First Malaysia Property Trust (FMPT) and Amanah Harta Tanah PNB (AHTP). For investors who are looking for a low-risk and long-term investment, property trust shares would add some “defensive” elements to their diversified portfolios in an unpredictable market. These investment vehicles have, however, received lukewarm response from institutional investors in Malaysia (Newell, Ting and Acheampong, 2002).1 In Malaysia, property trusts and listed property stocks are co- listed under different sections of the KLSE. They offer alternative securitized real estate investments for investors. In terms of their underlying asset holdings, the two securitized real estate markets are almost indistinguishable with the exception that property trusts are subject to the following investment restrictions 2 : (i)
At least 75% of the size of the fund for an unlisted trust or 80% for a listed trust shall be in real property and single purpose companies most of the time; (ii) The trust fund shall not be involved in property development activities, but it may enter into an agreement at any stage in the development of a property to purchase the property upon its completion; (iii) The borrowings of the fund shall not exceed 10% of the gross assets of the fund unless otherwise approved by the securities commission. In the US, there was abundant of literature attempting to compare the characteristics of REITs with stocks and real estate (Liu, Hartzell, Greig and Grissom, 1990; Giliberto, 1990 and 1993; Gelner, 1993; Ross and Zisler, 1991; Liang, McIntosh and Webb, 1995; Wang, Erickson and Chan, 1995; Ghosh, Miles and Sir mans, 1996; and others). The answers to the intriguing question of “Are REITs stocks or real estate?” are still inconclusive. Evidence has shown that REITs price movements are closely correlated with those of small capitalization stocks, but they also share common fundamental market factor with unsecuritized real estate market (Giliberto, 1990; Geltner, 1993). In Malaysia, property stocks are another category of stocks that share close characteristics
1
2
In a survey of the Chief Executive Officers and Manager of listed property trusts conducted by Ting (1999), the factors that constrain the ongoing development of listed property trusts in Malaysia were identified, which include lengthy capital raising process, poor perception and lack of demand for the products, limited underwriting support, low yield properties, few institutional investors, and attractive competing investment options. These are extracts from the Guidelines on Property Trust Funds issued by the Securities Commission on 26 June 1995.
1
with REITs 3 because the performance of both stocks are dependent on the real estate market activities, and yet they are subject to stock market volatility4 at the same time. Do REITs behave like real estate stocks in Malaysia? Are the two securitized real estate investments perfectly substitutable and integrated? We attempt to look at the above questions by examining the price reactions of the two securitized real estate stocks to selected market events: new listing and property acquisition events. If the two securitized real estate stocks share the common market characteristics, their share prices should react consistently and symmetrically to announcements of new listings and property acquisition activities of either of the two stocks. The entry of new REITs broadens the choice of institutional and small retail investors on the indirect real estate investments. It will also, on the other hand, compete indirectly with the existing listed property stocks for market capitals. Will the new listing of REITs dilute the market share of capital of listed property stocks and depress the performance of the stock prices? Will the new listings of REITs increase the avenues for divestitute of real estate assets for listed property companies5 ? If the latter is true, we should expect positive abnormal returns to the property stocks during the REITs listing event period. The tests of the effects of new listing of REITs and property acquisition activities of both REITs and property stocks will provide evidence for the relationship between the REITs and listed property stocks. The results will also be a joint test of the semi-strong form efficient market hypothesis for the Malaysian’s stock markets. Unlike REITs listed on the New York Stock Exchange (NYSE), where tax break is granted to REITs, as long as 90 percent of the REIT taxable income is distributed as dividend back to its investors. In Malaysia, there are no tax advantages available to shareholders of property trusts. The empirical findings of Malaysia’s REIT market will thus shed different lights to the extensive literature in the US on the findings of the effects of acquisition strategies (Hite and Owers, 1983; Hite, Owers and Rogers, 1984; Schipper and Smith, 1983; Owers and Rogers, 1986; Allen and Sirmans, 1987; Rutherford and Nourse, 1988; Glascock, Davidson, Sirmans, 1989 and 1991; and others) and new listings (Reilly, 1973; Wang Erickson and Chan, 1995, and others) on securitized stock performance.
3
4
5
Unlike in the US, there are no differences in the tax structure between property stocks and REITs in Malaysia. REITs do not enjoy tax break advantage over the real estate stocks. While Allen and Sirmans (1987) show that stock market responds positively to the REIT acquisition events, Wang, Erickson and Chan (1995) show that REIT stocks did not enjoy the same level of securitization benefits like other stocks in the stock market. REIT stocks also did not receive the same level of services such as information dissemination, monitoring activities and pricing mechanism in the stock market compared to other stocks. It was therefore suggested that REITs may not be viewed as pure stocks. An analyst was quoted to say that REITs “provides an alternative divestment avenue for developers to unlock asset values compared to the traditional direct sale method,” during the announcement of a new REIT to go public in Singapore (Felisa Batacan, The Strait Times, 10 November 2001). The property stocks in Singapore indeed surged when CapitaLand, a listed property company in Singapore, launched its public offer of the Singapore’s first property trust. The public offer of the property trust was, however, aborted subsequently.
2
This paper applies the event parameter methodology with dummy variables to analyse the effects of the listing of new property trusts and the acquisition of real estate assets announcements on the property trusts and property stock performance for the period 1990 to May 2002. This study is restricted to companies listed as property stocks and property trusts on the Kuala Lumpur Stock Exchange (KLSE) of Malaysia. The announcements of new listings and property acquisitions are collated mainly from the public sources. The paper is organized into 6 sections. Section 1 sets-up the objectives and motivations of the study. Section 2 reviews literature on the effects of property acquisition and new listing events on the returns of the securitized real estate markets. Development and historical performance of the listed property trusts in Malaysia are discussed in Section 3 to set the background for readers who are unfamiliar with the Malaysia REIT markets. Section 4 elaborates the empirical methodology, which covers sample data collection, event identification and definition, regression models and abnormal return estimation. The analyses of the empirical results and the possible implications of the findings for the REIT investors were discussed in Section 5. Section 6 concludes the study. 2.
Literature Review
REITs are one of the commonly adopted organization forms into which corporations with substantial real estate holdings can spin-off or sell-off their real estate assets. Rutherford and Nourse (1988) applied the classic event study of Ball and Brown (1968) and Fama, Fisher, Jensen and Roll (1969) to study the wealth effects of parent corporations when an independent corporate real estate unit was formed to manage its real estate. They found positive gain for the parent companies in setting up REITs to facilitate divestitute of their real estate, especially if the parent companies are in real estate business. Divestiture of real estate assets has been used in many corporate restructuring and reorganization that aims to enhance the corporate wealth via transferring out from the parent companies the undervalued real estate assets or operation. The corporate restructuring could be accomplished in different forms, with the spin-off and sell-off being the two most well studied in corporate finance literature. Spin-offs involve separation of the divesting firm into two firms, where a newly formed subsidiary will assume ownerships of the real estate assets or operations of the divesting firm. The shares of the newly incorporated subsidiary will be distributed tax- free on a pro-rata basis to the stockholders of the parent firm as dividends (Hite and Owers, 1983; Schipper and Smith, 1983; and Hite, Ower and Roger, 1984). The three studies by Hite and Owers (1983), Schipper and Smith (1983) and Hite, Ower and Roger (1984) all found significant positive abnormal returns to shareholders of divesting firms in response to the spin-off announcements. With a smaller sample of 33 spin-offs announcement between 1962 and 1982, Hite, Owers and Roger (1984) found two-day abnormal returns of 5.7% for the sample stocks before and on the spin-off announcement days, compared to 3.3% in Hite and Owers (1983) and 2.8% in Schipper and Smith (1983) studies. Hite, Owers and Roger (1984) reported a higher average gain of 9.1% from the spin-off operations by non-real estate firms, a result that contradicts with the findings of Rutherford and Nourse (1988). They reported only a marginal significant gain of 0.97%
3
over three days leading to the announcement compared to a 20-day 12.31% gain for real estate related firms when restructuring via different spin-off organization forms. Hite and Owers (1983) tested two hypotheses on spin-off gains by divesting firms. They concluded that the gains of the spin-offs were attributed to the improved contracting efficiency, which allows both the parent and spun-off firms to capitalize on their comparative advantages. There was no evidence to suggest that senior security holders such as bondholders and preferred stockholders of the parent firms were adversely affected by the spin-off events. They also found that firms which spin-off real estate assets for the merger and specialization objectives yield positive abnormal gains of 0.116 and 0.145, compared to a negative gain of 0.047 for those firms that choose spin-offs for regulatory and legal reasons. On the voluntary spin-offs that are influenced by tax and regulatory environment, Schipper and Smith (1984) found that firms who attain tax and regulatory advantage and improved management efficiency through the voluntary spinoffs would gain positive wealth effects. Sell-off is a more direct way of divesting real estate that involves outright sale or transfer of the real estate assets to a single or multiple acquiring or buying firms in exchange for cash or other securities of the acquiring firms. 6 In a sample sell-off announcements involving 55 sellers and 16 acquirers, Owers and Rogers (1986) found significant upward stock price revision by 0.7% for seller and 1.2% for acquirer over two-day event periods. Their findings were not able to verify whether the sell-offs were motivated by undervaluation of real estate assets or for tax benefits reason. Allen and Sirmans (1987) in examining the wealth effects of REIT merger on the acquiring trust’s shareholders, found a positive and significant two-day abnormal return of 5.78% in a sample of 38 REIT merger cases. They also showed that the value gains in the merger exercise were largely attributed to the improved management efficiency, and not due to the offsetting tax loss reason. In a study by Glascock, Davidson and Sirmans (1989) involving acquisition and disposition of real estate assets by 79 non-real estate firms from 1981 to 1986, they found weak evidence of positive returns for dispositions, but no statistical abnormal returns associated with acquisition of real estate assets announcements. The results led them to conclude that real estate assets themselves offer no unique opportunity to the market to earn excess returns, and non-real estate firms may lack the comparative advantages in disposing and acquiring real estate assets vis-à-vis REIT firms. Glascock, Davidson and Sirmans (1991) extended their 1989 paper to further examine effects of the market structure, the strategic behaviour of firms and the type of real estate assets on the firms’ real estate acquisitions and dispositions. They found that sellers and buyers both recorded positive and significant gains of 1.35% and 0.96% respectively on the announcement day of the disposition and acquisition of the real estate assets. The gains for buyers’ disposition were only accumulated for the cases when a single purchase was made, and 6
In the context of financial distress, the sale of the all or part of the firms’ real estate assets is sometimes called liquidation. In voluntary liquidation, firms will distribute the proceeds from the sale of the assets back to stockholders, and this feature distinguishes liquidation from a sell off. In sell-off, the proceeds are kept by divesting firms and presumably redeployed into other investments (Owers and Rogers, 1986).
4
there were no significant excess returns accumulated in the multiple disposition cases. Buyers pursuing an extensive (four or more) acquisition program attained negative, but insignificant excess returns. The gains of the sellers and buyers were associated with the dispositions and acquisitions of real estate assets, and not real estate operations such as divisions or subsidies. Liow (1997) reaffirmed Owers and Rogers (1986) and Glascock, Davidson and Sirmans (1989, 1991) findings that there are positive gains associated with the disposal announcement. Liow (1997) used 67 weekly disposal events of the UK retailers for the period 1981-1992. The size of the divested assets was also positively correlated with the corporate gains in the disposition. He also found significant value enhancement to the retail firms in 27 cases of sales-and- leasebacks and 8 cases of property swaps announcements. Like Glascock, Davidson Sirmans (1989), Liow’s (1997) results on the acquisition effects were insignificant, and he explained that the real estate acquisitions by the retailers were in- line with their trading growth program, and the capital gains in the acquisition were thus discounted by the market. Studies on the announcement effects associated with new listing of REITs were not found in the literature. However, Wang, Chan and Gau (1992) in studying the REIT initial public offerings (IPO) in the US showed that there were significant overpricing of the IPO, which are independent of the offer price, issue size, distribution method, offer period and underwriter reputation. Information problems were hypothesized as one of the reasons for the overpricing. Studying the performance of the IPOs in Hong Kong, Singapore and Malaysia for the period 1978-1984, Dawson found the higher positive initial returns for IPOs listed on Malaysia market vis-à-vis Hong Kong and Singapore markets. Based on a sample of 53 new issues in the US from 1963 to 1965, Reilly (1973) found positive returns for new issues during a rising market, whereas the returns were negative in a declining market. 3.
Malaysia REIT Markets
The history and development of REIT dated back to the first listing of Arab-Malaysian First Property Trust (AMFPT) on KLSE main board on 28 August 1989. Two other property trusts: First Malaysia Property Trust (FMPT)7 and Amanah Harta Tanah PNB (AHTP) were respectively listed on 23 November 1989 and 28 December 1990. Mayban Property Trust Fund One (MPTF1) was the latest addition to the KLSE listing on 25 March 1997 following the revision of the Securities Commission’s guidelines for property trust in 1995. 8 Table 1 summarizes the listing details and property compositions of the four listed property trusts. [Insert Table 1] 7
8
First Malaysian Property Trust was suspended from the KLSE on 4 March 2002 following a proposal of the substantial shareholder, Commerce Asset Holdings Berhad (89.15%), to extend a voluntary offer to acquire the remaining issued and paid-up units of the trusts on 14 March 2001. There were several relaxations to the guidelines for property trusts with respects to property acquisition and disposal, borrowing, depreciation and appraisal requirements (see Newell, Ting and Acheampong, 2002 for details).
5
In Malaysia, property companies and property trusts are co- listed under property and trust sections of the KLSE. Listed property companies were not subject to the guidelines for property trusts and they are mainly governed by the Companies Act 1965, whereas property trusts though are securitized vehicles for real estate investments are subject to investment and financing restrictions as highlighted in early section. Compared with REITs in the US and the listed property trusts in Australia, Malaysia’s property trusts or REITs are not tax neutral, and they are also not bound to distribute 90% of their income back to the investors as required in the US and Australia markets. The performance of the listed property trusts over a sample period of January 1990-May 2002 was examined using monthly price data (unadjusted for dividends). The quarterly return trends (after removing the outliers in December 1993 9 ) of the four property trusts were graphically shown in Figure 1. There was relatively more volatility in the price movement of the property trusts in the post-Asian Financial Crisis period (4Q97). [Insert Figure 1] The historical performance of the listed property trusts were estimated and compared with the stock market and property stock market performance, which were represented by the KLSE composite index (KLSECI) and the KLSE property stock index (KLSEP) respectively. The average monthly risks and returns and the correlation matrix were summarized in Table 2. With the exception of MPTF1, which was listed in 1997, the three listed property trusts outperformed the property stock index, but they were more volatile with a standard deviation ranging 13.55% to 44.72%. These statistics were largely distorted by the exceptionally strong returns for the month of December 1993, which witnessed intense speculative activities on the KLSE. [Insert Table 2] In order to better reflect the true potential and performance of the listed property trusts, the December 1993 outliers were removed and the historical returns, risks and correlations were re-estimated in Table 3. The results were not inconsistent with those reported in Newell, Ting and Acheampong (2002), which showed that the returns of the property trusts were all in the negative region, and they underperformed the overall property stock return of -0.02%. AMFPT has the lowest volatility of 9.98% among the listed property trusts, and the most recent listed MPTF1 was the worst performer with a negative return of 1.40%. The correlation analysis shows that the listed property trusts offer limited diversification benefits for the property sector, because of their relatively
9
The monthly return for Amanah Harta Property Trust (AHTP) was exceptionally high at 490.9% due to the price hike to M$6.5 on 31 December 1993 from the previous month price of M$1.1 (30 November 1993). The returns for Arab-Malaysian First Property Trust (AMFPT) and First Malaysian Property Trust (FMPT) were also high estimated at 111.54% and 203.57% respectively in the month of December 1993. The high returns and volatility in 1993 was fuelled by intense speculative market activities in KLSE during the period (Newell, Ting and Acheampong, 2002).
6
high correlation coefficients of between 0.6566 (ANTP) and 0.8476 (MPTF1) with the return of KLSEP. [Insert Table 3] The close relationship between the property stocks and listed property trusts in Malaysia may suggest that there are common fundamental real estate market factors that drive the returns of the two markets (Giliberto, 1990 and Geltner, 1993). If this hypothesis is true, the market may not be fully segmented and information on the acquisition and new listing activities of property trusts may be impounded in the price processes of property stocks and vice versa. This hypothesis motivates us to test the wealth effects of the property trusts and property stocks in responding to their respective market acquisition and new listing activities in the subsequent sections. 4.
Empirical Methodology
4.1 Data Analysis This study uses daily stock price data of 4 property trusts and 71 property stocks listed on the KLSE for a sample period from January 1, 1990 to May 8, 2002. The data were collected from Datastream. The 71 property stocks constitute 92.2% of the total listed stocks under property section in the KLSE. The empirical results based on these samples should provide good indication of the property stock market reactions to the controlled listing and acquisition events in the tests. The list of the sample property stocks and their respective abbreviations used for reference in this study are summarized in Appendix 1. The 4 property trusts represent the entire population of the listed trust section of the KLSE, but the length of the sample price data varies due to different listing periods. Table 1 presented in the earlier section provides a good summary of the 4 sample listed property trusts. For the proxy of market return (Rmt ), the KLSE composite index, which has a comprehensive and wide coverage of stock market activities, was selected. For every announcement, daily stock price starting from day –20 and ending at day +20 relative to the announcement date will be defined as the “event window.” The “event day” is defined as day 0, which indicates the day when an announcement of a new listing or an acquisition is made. There will be a maximum of 41 dummy variables in each stock return model for each announcement. In order to ensure consistency in the empirical estimation, sample property stocks and property trusts that do not have sufficient timeseries price observations, which are defined in this context as a minimum 200 observations before and 20 observations after the controlled event, will be excluded from the empirical tests. 10
10
Peterson (1989) specifies that a typical length of the event period range from 21 to 121 days for daily studies, with an event window of 21 days. In this study, 221 time -series price observations were selected to provide sufficient degree of freedom for the empirical regression tests. There is no cap on the sample size for the post event data, but the sample size must contain at least 20 observations over the event window period.
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For new property trust listing events, only the listing of the recent Mayban Property Trust Fund One (MPTF1) was used as the controlled events. The listings of Arab-Malaysian First Property Trust (AMFPT) and First Malaysian Property Trust (FMPT), which were listed before the starting sample period, and Amanah Harta Tanah PNB (AHTP), which was listed on 28 December 1990, were excluded from the tests because the events were outside the sample timeframe. The controlled events announced by property trusts and listed property companies were collected by scanning through local newspapers like the New Straits Times and the Business Times. For the second event test on property acquisition effects, only acquisition announcements publicized in the major local newspaper were selected for the tests. 11 Due to the large sample size, only one acquisition event for each sample stock will be used in the event study. When more than one acquisition for a sample stocks are observed, the most recent one will be selected. For acquisition announcement, it is important to ascertain the earlier date at which the intent of the acquisitions is made public in the newspapers by the sample firms. However, when the earlier announcement before the completion of a acquisition deal were not obtained, the press announcement and deal completion dates will be used synonymously as the event date in the tests. 12 The listing and acquisition events selected as controlled events in this study are further discussed in the next section. The event scanning process was carried out using the electronic collection of newspaper articles in the Dow Jones Interactive (DJI) database. It is a reliable source to obtain past announcements with an accurate date of public disclosure. One limitation with the use of DJI is that the database does not stretch to cover the entire sample period, i.e. the events in the earlier part of the sample period will not be captured. As the study uses the Business Times (Malaysia) as the main source, the electronic news captured in the DJI commences only from 1 January 1995. 4.2
Event Identification
This study aims to examine how the “noises” of the new listing of property trusts and acquisition activities of property trusts and listed property companies affect property stocks returns. In event study methodology, the empirical tests can be designed to investigate the impact of a single common event by a portfolio of securities or a multiple homogenous events on different sample stocks. In a single event study like the announcement of new listing of a property trust, prices of stock samples are exposed to a common set of exogenous influences. However, in a multi-event type study such as the acquisition by sample firms, the distributions of calendar times and the idiosyncratic influences of each acquisition will smooth out some systematic errors in the results. 11
12
If there were leakages of information prior to the acquisition completion, they would have been “noises” which are referred to as insider information. On the assumption that the market is at least strong-form efficient, the insider information will not qualify for the acquisition event definition in this study. Given the strategic importance of the acquisition events, many companies do not publicly disclose their acquisition proposals or plans during the negotiation dates. The announcement of the acquisition normally coincides with the completion of the deal. These announcement dates can be considered as the closer proxy of the actual event dates in this study.
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Event announcements may emanate from difference sources not only from within the firms, but outside the firms. Identifying an event of interest and the ability to ascertain the timing of the event are equally important in the tests. In identifying the events, the following set of rules should be complied with. When there are different event dates reported by newspapers, the earlier date will be selected. 13 When clustering of events occurs, where multiple event announcements are reported for a firm on the same day, the events are excluded because of the difficulty in disaggregating the influence of different events on the abnormal stock returns. If a single event is reported over several days, only the first announcement was considered as the event day. This removes any correlation between the residuals of the consecutive announcement days. For the purpose of the empirical tests, two sets of events are selected and defined. The first set of event comprises the new listing of the Mayban Property Trust Fund One in 1997. On the new listing events, the information flows to the listed property stock market and the property trust markets will be tested and compared jointly. If the two securitized real estate markets were efficient in the semi- strong form, there would be instantaneous adjustment of stock prices to the new information. In other words, no excess or abnormal returns in the property trust and the listed property stock markets should be expected around the event periods. This is also a joint test of the semi- strong form efficient market hypothesis. The announcement of listing of MPTF1 was reported 4 days ahead of the actual listing on 25 March 1997 in Dow Jones International News on 21 March 1997. 14 Therefore, this earlier date will be used as the event date, i.e. t = 0, in the tests of new listing effects of MPTF1. The second set of tests involves multiple events of property acquisitions, which include properties and lands, by property trusts and listed property firms. As highlighted in the earlier section, the tests include only the acquisition events that are captured in DJI news database. If the first announcement of the intent to acquire a property is not reported, or if it is coincided with the date of completion of an acquisition, this date will be referred to as the t=0 in the study. A collection of 2 acquisition announcements for property trusts and 20 acquisition announcements for listed property companies are collected and compiled in Table 4. [Insert Table 4] 4.3
Empirical Models
Following the classical event study papers by Ball and Brown (1968) and Fama, Fisher, Jensen and Roll (1969), the event study methodology has been applied to analyzing many corporate restructuring and market events in real estate literature. The methodology 13
14
The correct estimation of market response should preferably be based on the date of the first public announcement, but some events may occur even earlier than the first public announcement. Other dates have been found on pre-listing events like nod to listing by the securities commission (20 April 1996 – Business Times), balloting (5 February 1997 – DJI News), postponement of listing (5 March 1997- The New Straits Times), but they will not be examined in this study.
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generally attempts to measure abnormal returns of stocks associated with the announcement of firm-related or market-specific events. The test is usually a joint test of the semi-strong form market efficient hypothesis. The traditional event methodology involves a two-stage estimation process. The first stage estimates a single- index market regression model (SIMM) using pre-event data over the period t = [-T, t1-1 ], where T is the sample size before the first date of the event window of t1 , which is represented in this study as t = [-220, -21]: R jt = α j + β j Rmt + ε jt
(1)
where: Rjt Rmt ßj
= = =
aj ejt
= =
the rate of return on security j at time t, the unit being one trading day; the rate of return on the value weighted market portfolio at time t; the slope of the ordinary least squares (OLS) regression estimates, which is estimated as E(Rjt ,Rmt )/ E2 (Rmt ), where E(Rjt ,Rmt ) is the covariance between Rjt and Rmt and E2 (Rmt ) is the market variance; the OLS estimate of intercept term; the residual return of security j at time t.
The regression model (1) represents the stock price behaviour as if there are no shocks of the controlled event. The second stage involves computation of the abnormal return or prediction error (PEjt ) for every day t, which is defined as the actual stock return (Rjt ) minus the predicted return ( Rˆ jt ) , and the cumulative prediction errors (CPEjt ) over the event window, t =[t1 , t2 ]=[-20, +20]. For a single security j, the PEjt and CPEjt can be represented as follows: PE jt
= R jt − Rˆ jt = R jt − (α j + β j Rmt )
(2)
t2
CPE jt
= ∑ PE jt
(3)
t =t 1
The two-stage estimation process can be consolidated into one stage by adding a vector of (0,1) dummy to the right hand side of the SIMM in equation (1). The dummy variable (Dst ) represent the specific event date within the event window [t1 , t2 ], and is indicated by 1 for the event date, s∈ [t1 , t1 -1,…, -1, 0, 1,…t2-1, t2 ] and 0 elsewhere. The SIMM model, incorporated with dummy variables, which is also known as event parameter model, has been widely used by Dufour (1980), Binder (1985), Thompson (1985), Karafiath (1988), Glascock and Karafiath (1995) and others. The model can be specified as follows: t2
R jt = α j + β j Rmt + ∑ δ js Dst +ε jt
(4)
s =t 1
where δ js denotes the estimated coefficient for dummy variable Dst , which is equivalent to the excess return or prediction errors (PEjt ) of security j on observation s. For a stock j,
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the cumulative prediction error (CPEjt ) over the event window period in equation (3) can be rewritten as: t2
CPE jt
= ∑ δ js
(5)
s= t1
For a sample of N stocks, the average prediction error (APEs) for each time s can be represented as:
APEs
=
1 N * δ js N ∑ j =1
(6)
The cumulative average prediction error (CAPEs ) for N-stock over an event window s=[t1 , t2 ] can then be computed as: CAPEs
4.4
=
1 t2 N * ∑∑ δ js N s=t1 j =1
(7)
Hypothesis Testing
To test the two securitized real estate markets’ reactions to new listing and acquisition announcements, the null hypothesis is defined as that if the announcements do not have any informational contents that are relevant to the investors, the abnormal returns of the two securitized real estate stocks around the event dates should not be significantly different from zero. For the analysis in the study, two main types of event announcements are examined: 1) new listing of property trust and 2) acquisition of properties by both listed property companies and property trusts. The hypothesis test of the new listing announcement of a property trust is a single event study involving multiple stocks in the two securitized real estate markets. The tests are designed to examine and compare the independent and joint price reactions of the property trusts and listed property stocks at an aggregate level. The first hypothesis tests whether there are significantly positive abnormal returns, which are measured by the cumulative average prediction errors, accrued to the N-sample property trusts (CAPEps) and the M-sample property stocks (CAPEqs), where p denotes property trust and q denotes property stocks, around the event window period, s =[t1 , t2 ]. If there were strong reactions of the prices of both securitized real estate markets to the announcement of new listing of property trust, i.e. Mayban Property Trust Fund One (MPTF1), the following null hypothesis will be rejected. Hypothesis 1: Test of the excess returns of the two securitized real estate markets to new listing announcement:
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H(1)0 : CAPE ps = CAPEqs =
1 t2 N 1 t2 M * ∑∑ δ js = * ∑∑ δ js = 0 N s=t1 j =1 M s= t1 j=1
(8)
The second null hypothesis is set-up to examine whether there are differences in the market reactions of the property trusts and property stocks over the event window s=[t1 , t2 ]. The null hypothesis can be represented as follows: Hypothesis 2: Test of difference in reactions of the two securitized real estate markets to new listing event: H(2)0 : CAPE ps − CAPEqs
=
1 t2 N 1 t2 M * ∑∑ δ js − * ∑ ∑ δ js = 0 N s= t1 j=1 M s= t1 j=1
(9)
If the above null hypothesis for event 2 is rejected, it may imply that there is segmentation between the property trust and property stock markets. The information flow was inefficient from one market to another market, although both share the common fundamental of investing heavily in real estate assets. For the acquisition event study, it involves multiple acquisition events of multiple property trusts and property stocks. Each acquisition event will be tested against respective stock price reaction independently. Based on the acquisition events listed in Table 4, the price reactions of property stocks and property trusts to the acquisition announcement are tested over the event window s using the hypotheses set-up below: Hypothesis 3: Price Reactions of securitized real estate markets to respective acquisition announcements H(3)0 : CAPEks
1 t2 N = * ∑∑ δ js = 0 X s= t1 j=1
(10)
where k=(p, q) and X represents number of acquisition events in either one of the securitized real estate markets. Hypothesis 4: Test of difference in excess returns between property trusts and property stocks around acquisition events H(4)0 : CAPE ps − CAPEqs
=0
(11)
If hypothesis (3) is rejected, it may imply that there is no wealth enhancement effect to the listed property firms and property trusts in their acquisition activities. Similarly, if hypothesis (4) is rejected, the excess returns, if any, will differ between the two markets. One market may react more significantly than another market to the acquisition announcement.
12
The above hypotheses can be tested using the standard t-tests for difference in means of the two sample securitized real estate stocks. The standard t-statistics can be computed as follows, ta for H(1) and H(3) and tb for H(2) and H(4)
ta =
CAPEks SE
,and
tb =
∆CAPEs SE
(12 a&b)
SE is the standard errors of the test parameters across samples, which can be defined as SE = σ X , where X is the cross-sectional sample size and σ is the sample standard deviation. ∆CAPEs indicates the difference in mean abnormal returns, i.e. ∆CAPEs = CAPEps – CAPEqs. 5.
Analysis of Results
The event parameter models defined in the earlier sections were estimated using Statistical Package for Social Sciences (SPSS) and the hypothesis tests were analysed using two-tail t-statistics. Average or cumulative prediction errors or abnormal returns (APEjt and CAPEks) are usually used in the event study to measure the market response to new announcements. Period t = 0 is the day on which the announcement of acquisition or new flotation of property trusts are first published in the newspapers. Hence, if the stock market is truly efficient, the prices of sample stocks should reflect quickly the new listing and acquisition information instantly on the day t =0. No abnormal returns should then be observed thereafter. 15 Hypotheses (1) and (3) will be tested using 1-sample test of the statistical significance of the APEjt and CAPEkt from zero, and for hypotheses (2) and (4), two-sample t-tests will be used to examine the difference in APEjt and CAPEkt between the property stocks and property trusts samples. The results are discussed in two subsections below. 5.1.
Announcement of New Listing of Property Trust
The new listing event is centred around the announcement of the new listing of the Mayban Property Trust Fund One (MPTF1) on 21 March 1997. Based on the earlier specified sample size requirement of 200 pre-event data and 41 sample data in the event window, i.e. t = [-220, -21], only 58 out of the 71 sample listed property stocks and 3 sample property trusts are included in the analysis for the new property trust listing effects. The results of the prediction errors estimates and the hypothesis test statistics are summarized in Table 5. [Insert Table 5] The results showed that listed property stock market reacted negatively and significantly to the new property trust listing information on day -D10, -D5, -D4 and –D2. No price adjustments were observed on the event day. In comparison, property trust market reacted 15
Reactions to stock price prior to the announcement dates may be possible if there were leakage of information via private sources, which are not examined in this study.
13
with a significantly negative abnormal return of –2.27% on –D1, and a significantly positive abnormal return of 2.71% on the event day. The tests on hypothesis (2a) showed that there was significant difference in the average prediction errors between the two securitized real estate markets on the new listing event announcement date t= 0 at a 5% level (t-statistic = -2.1221). At aggregate levels, we observed more significant negative cumulative abnormal returns in property stock market over the event window periods, with the exception of event intervals [-3, +3] and [0, +5], compared with property trusts. For property trusts, it is interesting to note that other property trusts reacted negatively prior to the announcement of the new property trust listing [-10, 0] with a downward adjustment of 4.86% in returns. The property trust market was, however, more opportunistic in the post- listing period with significant and positive abnormal returns of +2.69% and +1.30% obtained in periods [0, +1] and [0, +5] respectively. In general, the null hypotheses (2b) were not rejected for all event window periods tested in Table 5 at 5% significance level. The results imply that the reactions in both listed property stocks and property trusts markets are consistent towards the new listing of MPTF1. 5.2
Acquisition Events
As summarized in Table 4, 22 acquisition events comprising 20 acquisitions in property stock market and 2 acquisitions in property trust market were collected from electronic newspapers captured in the DJI database. We repeated the same event parameter estimation process to test the reactions of the respective stock prices to the announcement of acquisition or real estate assets. In an earlier study by Glascock, Davidson and Sirmans (1989) using sample non-real estate firms in the US from 1981 to 1986, they found no significant abnormal return behavior associated with the announcement of acquisition of real estate assets. For the listed property firms, our results in Table 6 were consistent with those found in Glascock, Davidson and Sirmans (1989), which showed no significant excess returns accumulated around the event window intervals. However, there were significant negative daily price reactions in the post-acquisition announcement dates on day +D1 and day +D3 by –0.86% and –1.45% respectively. [Insert Table 6] The average daily abnormal returns of the property trusts in reacting to the acquisition events were mixed. The results rejected null hypothesis 4(a) on day +D1, which showed significant abnormal returns, but with opposite signs, between the two markets. On a cumulative basis, we observed significant negative price adjustments of 8.2% and 1.95% during the event intervals [-10,0] and [-1,0] respectively. Investors, however, would be able to expect a significantly positive premium of 2.92% for property trust shares over a 10-day post-acquisition period.
14
6.
Conclusion
REITs, or property trusts, are a relatively new instrument in Malaysia and several Asian markets. They are co- listed with property stocks, which share some common interests in terms of their investment activities and asset holdings. Unlike in the US, there are some institutional restrictions on the REITs investment activities and also there are no tax benefits conferred to REITs entities in Malaysia. Therefore, it is useful to find out through the tests of the difference in market reactions of Malaysia’s property trusts and property stocks to corporate restructuring activities such as acquisition and new listing. The results may indirectly verify whether the findings of corporate restructuring effects on securitized real estate prices in the US will hold in Malaysia despite the differences in the institutional market structures. By comparing the market reactions to acquisition and new listing announcements, the study also jointly tests the flows of the information between the two markets. This information will be useful for portfolio investors, who plan to diversify into property trusts and property stocks. Our tests of the price behaviour of 58 listed property stocks and 3 property trusts associated with the announcement of the new listing of Mayban Property Trust Fund One (MPTF1) in 1997 showed that property stocks and property trusts prices reacted significantly with a negative abnormal return of 2.29% and 4.86% respectively during a interval of 10 days before the new listing announcement. Prices were adjusted upward in the post- listing periods over a period of 5 days. The three rival property trusts recorded a significantly negative average abnormal return of –2.27% on –D1, and a significantly positive abnormal return of 2.71% on the MPTF1 listing announcement day. The hypothesis tests showed that there was significant difference in the average prediction errors between the two securitized real estate markets on the new listing announcement date t= 0 at a 5% level. In the tests of the acquisition announcement of 22 property stocks and 2 property trusts, the results showed that listed property stock market was efficient in the semi-strong form, because property stock prices reflected the acquisition news instantly and no significant excess returns were accumulated around the event window intervals. The findings were consistent with those found in Glascock, Davidson and Sirmans (1989), which also found no significant abnormal return behavior associated with the announcement of acquisition of real estate assets for non-real estate firms in the US. For property trusts, there were significant negative price adjustments of 8.2% and 1.95% during the event intervals [10,0] and [-1,0] respectively. However, over a 10-day post-acquisition announcement period, property trust shares will be traded at a significantly positive premium of 2.92%. In summary, the KLSE property shares and property trust did not establish a consistent and homogenous pattern of response to the new listing and acquisition announcements. No abnormal returns were detected in property stock market when acquisition news was publicized in local newspapers. For new listing events, we found negative market reactions in both real estate stocks in a 10-day period leading to announcement. The negative returns were reversed in the post anno uncement periods for the sample property
15
stocks and property trusts. The two securitized real estate stocks do not perfectly share or response to the same set of information concerning corporate restructuring activities. This implies that institutional investors with portfolio comprising property trusts and property stocks could still achieve diversifications associated with unsystematic market shocks.
16
Reference: Allen, P.R. and C.F. Sirmans, An Analysis of Gains to Acquiring Firm’s Shareholders: The Special Case of REITs, Journal of Financial Economics, 1987, 18, 175-184. Ball, R. and P. Brown, An Empirical Evaluation of Accounting Income Numbers, Journal of Accounting Research, 1968, 6, 159-178. Binder, J., Measuring the Effects of Regulation with Stock Price Data, Rand Journal of Economics, 1985, 16, 167-183. Dawson, S., Secondary Stock Market Performance of Initial Public Offers: Hong Kong, Singapore and Malaysia 1978-1984, Journal of Business Finance and Accounting, 14, 92-103. Dufour, J., Dummy Variables and Predictive Tests for Structural Change, Economic Letter, 1980, 6, 241-247. Fama, E.F., L. Fisher, M.C. Jensen and R. Roll, The Adjustment of Stock Prices to New Information, International Economic Review, 1969, 10:1, 1-21. Geltner, D., Estimating Market Value from Appraised Values Without Assuming an Efficient Market, Journal of Real Estate Research, 1993, 325-345. Giliberto, S.M., Equity Real Estate Investment Trusts and Real Estate Returns, Journal of Real Estate Research, 1990, 5:2, 259-263. Giliberto, S.M., Measuring Real Estate Returns: the Hedged REIT Index, Journal of Portfolio Management, 1993, 19:3, 94-99. Glascock, J.L., W.N. Davidson and C.F. Sirmans, An Analysis of the Acquisition and Disposition of Real Estate Assets, Journal of Real Estate Research, 1989, 4:3, 131-140 Glascock, J.L., W.N. Davidson and C.F. Sirmans, The Gains from Corporate Selloffs: The Case of Real Estate Assets, AREUEA Journal, 1991, 19:4, 567-582. Glascock, J.L. and I. Karafiath, Statistical Inference in Event Studies Using Multiple Regression, in Schwartz, A.L. Jr and S.D. Kapplin (eds.), Alternative Ideas in Real Estate Investment , American Real Estate Society, Kluwer Academic Publishers, Norwall, M.A., 1995, 177-189. Ghosh, C., M. Miles and C.F. Sirmans, Are REITs Stocks? Real Estate Finance, 1996, 46-53. Hite, G. L. and Owers, J.E., Security Price Reactions Around Corporate Spin-Off Announcements, Journal of Financial Economics, 1983, 12, 409-436.
17
Hite, G.L., J.E. Owers and R.C. Rogers, The Separation of Real Estate Operations by Spin-Off, AREUEA Journal, 1984, 12:3, 318-332. Karafiath I., Using Dummy Variables in the Event Methodology, The Financial Review, 1988, 23:3, 351-357. Liang, Y., W. McIntosh and J. Webb, “Intertemporal Changes in the Riskiness of REITs, ournal of Real Estate Research, 1995, 10:4, 427-443. Liow, K.H., An Empirical Investigation of UK Retail Companies’ Property Asset Strategies, Journal of Property Finance, 1997, 8:1, 24-34. Liu, C.H., D.J. Hartzell, W. Greig and T.V. Grissom, The Integration of the Real Estate Market and the Stock Market: Some Preliminary Evidence, Journal of Real Estate Finance and Economics, 1990, 3:3, 261-282. Newell, G., Ting, K.H. and Acheampong, P., Listed Property Trusts in Malaysia, Journal of Real Estate Literature, 2002, 10:1, 109-118. Overs, J.E. and R.C. Rogers, The Divestitutre of Real Estate Assets by Sell-Off, Real Estate Issues, Spring/Summer 1986, 29-35. Reilly, F.K., Further Evidence on Short-Run Results for New Issue Investors, Journal of Financial and Quantitative Analysis, 1973, 8:1, 83-90. Ross, S.A. and R.C. Zisler, Risk and Return in Real Estate, Journal of Real Estate Finance and Economics, 1991, 4:2, 175-190. Rutherford, R.C. and Nourse, H.O., The Impact of Corporate Real Estate Unit Formation on the Parent Firm’s Value, Journal of Real Estate Research, 3:3, 73-84. Schipper, K. and A. Smith, Effects of Recontracting on Shareholder Wealth: The Case of Voluntary Spin-Offs, Journal of Financial Economics, 1983, 12, 437-467. Ting, K.H., Listed Property Trust Industry in Malaysia: Factors Constraining its Growth and Development, Proceedings of International Real Estate Society Conference, Kuala Lumpur 1999. Thomson, R., Conditioning the Return Generating Process on Firm Specific Events: A Discussion of Event Study Methods, Journal of Financial and Quantitative Analysis, 1985, 20, 151-186. Wang, K., S.H. Chan and G. Gau, Initial Public Offerings of Equity Securities: Anomalous Evidence Using REITs, Journal of Financial Economics, 1992, 31, 381-41. Wang, K., J. Erickson and S.H. Chan, Does the REIT Stock Market Resemble the General Stock Market? Journal of Real Estate Research, 1995, 10:4, 445-460. 18
Appendix 1: List of Sample Property Stocks & Property Trusts No Name of Stocks (A) Property Trust Sample (4) 1 AMANAH HARTA TANAH PNB 2 ARAB - MLAYSN.1ST PR.TST.
Symb o l
No
Name of Stocks
Symbol
AHTP AMFPT
3 4
MAYBAN PROPERTY TRUST FUND ONE MPTF1 FIRST MALAYSIA PR.TRUST FMST
(B) Property Stocks Sample (71) 1 A&M REALTY 2 ANSON PERDANA 3 ARAB - MALAYSIAN DEV. 4 ASAS DUNIA 5 ASIA PACIFIC LAND 6 AVENUE ASSETS 7 AYER HITAM TIN DREDG. 8 BANDAR RAYA DEV. 9 BCB 10 BOLTON 11 BRISDALE HOLDINGS 12 COUNTRY HEIGHTS HDG. 13 CRESCENDO 14 CRIMSON LAND 15 DAIMAN DEVELOPMENT 16 DAMANSARA REALTY 17 DIJAYA 18 EASTERN & ORIENTAL 19 ECONSTATES 20 EKRAN 21 EUPE 22 EUROPLUS 23 FACB RESORTS 24 FARLIM GROUP (M) BHD. 25 FIMA 26 GLOMAC BHD. 27 HONG LEONG PROPS. 28 HUNZA PROPERTIES 29 IGB 30 INNOVEST 31 IOI PROPERTIES 32 ISLAND & PENINSULAR 33 KELADI MAJU 34 KEJORA HARTA 35 KSL HDG.BHD. 36 KUALA LUMPUR INDS.HDG.
AMRE DUFF AMDB ASAS ASIA KAMO AYER BANA BCBA BOLT BRIS COUN CRES MCBH DAIM DAMA DJCP EAST ECON EKAN EUPE LARD FLOP FARL FIMA GLOM HOLE HUPR IGOB INES LSHT ISLP KMAJ KEJA KSLH KULK
37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71
LAND & GENERAL LIEN HOE MALAYSIA PACIFIC LAND MENANG METRO KAJANG MK LAND HOLDINGS MUI PROPERTIES NEGARA PROPERTIES ORIENTAL INTEREST PARAMOUNT PASDEC HOLDINGS PELANGI PETALING GARDEN PK RESOURCES BHD SAP HOLDING SATERAS RESOURCES SELANGOR DREDGING SELANGOR PROPERTIES SOUTH MALAYSIA INDUSTRIES SHL CONSOLIDATED SIME UEP PROPERTIES SP SETIA BHD. SPK SENTOSA SRI HARTAMAS SUNRISE SUNWAY CITY TAIPING SUPER TALAM TANCO HOLDINGS U - WOOD HOLDINGS UDA HOLDINGS UNIPHONE TELECOMMUNICATIONS UNITED MALAYAN LAND WORLDWIDE HOLDINGS YTL LD.&DEV.BHD.
LGEN LIEN MALA MENA METO PEFF MUTD KUND ORIE PARA PASD PELA PETG PKIM SHAH SATA SELD SELP STUD SHLC SIUP SYPE SENT SRIH SUNR CITY TAIP TALA JERM UWOD UDAH UNIP UMFM WIDE TACO
19
Table 1: Property Trusts Listed on KLSE in Malaysia Abbreviation
AHTP
AMFPT
Name of Trust
Amanah Harta Tanah PNB
Arab-Malaysian First Property Trust
Constituted
20-Mar-89
16-Mar-89
30-Sep-88
11-Jan-90
Date of Listing
28-Dec-90
28-Sep-89
23-Nov-89
25-Mar-97
Skim Amanah Saham Bumiputera (41.01%)
Arab-Malaysian Development Bhd (41.98%)
Commerce Asset-Holding Berhad (89.17%)
Malaysia National Insurance Berhad (7.08%)
Malaysia Nasional Insurance Berhad (5.35%)
Arab-Malaysian Merchant Bank Berhad (1.5%)
Universiti Putra Malaysia (0.80%)
Kumpulan Darul Ehsan Berhad (4.72%)
Perlaburan Hartanah Nasinoal Berhad
Arab-Malaysian Property Trust Management Berhad
Amanah Property Trust Managers Berhad
Mayban Property Trust Management Berhad
Net tangible assets (FY2001) US$/(RM)
US$36,298,099.21 (RM137,932,777.00)
US$46,852,339.21 (RM178,038,889.00)
US$23,920,106.32 (RM90,896,404.00)
US$25,977,804.74 (RM98,715,658.00)
Number of units of RM1.00 each issued
100,000,000
138,400,225
105,855,853
106,037,000
Net tangible asset per unit (FY2001) US$/(R$)
US$0.36 (RM1.38)
US$0.34 (RM1.29)
US$0.23 (RM0.86)
US$0.24 (RM0.93)
Stock price (on 8 May 2002)
US$0.20 (RM0.77)
$0.21 (RM0.79)
$0.16 (RM0.60)
$0.11 (RM0.40)
44.16%
38.76%
30.23%
56.99%
83.43% / (13 properties)
94.35% / (2 properties)
58.66% / (6 properties)
71.24% / (5 properties)
ii) Shares/bonds
11.77%
2.35%
17.84%
26.34%
iii) Cash & other receivables
4.80%
3.30%
23.5%
2.42%
Major Shareholders (% share)
Asset Manager
Discount to NTA
FMPT
MPTF1
First Malaysia Property Trust Mayban Ptroperty Trust Fund One
Composition of Investment (% of total asset): i) Property
# RM denotes Malaysia Ringgit. The exchange rate is US$1:RM3.80. @ The Net Tangible Asset and Investment Composition details are abstracted from the respective property trusts annual reports for the financial year 2001.
20
Table 2: Historical Performance and Correlation Matrices of Property Trusts and KLSE Composite Stock and Property Stock Indices RAHTP RAMFPT RMPTF1 RFMPT RKLSECI RKLSEP RAHTP 1.0000 RAMFPT 0.8216 1.0000 RMPTF1 0.7180 0.8100 1.0000 RFMPT 0.8700 0.8543 0.7460 1.0000 RKLSECI 0.4612 0.6496 0.7673 0.5256 1.0000 RKLSEP 0.3824 0.6626 0.8513 0.5402 0.8611 1.0000 Average Standard Deviation
3.08%
0.40%
-1.40%
1.12%
0.63%
0.15%
44.72%
13.55%
10.38%
22.16%
9.15%
12.21%
Table 3: Historical Performance and Correlation Matrices of Property Trusts and KLSE Composite Stock and Property Stock Indices RAHTP RAMFPT RMPTF1 RFMPT RKLSECI RKLSEP RAHTP 1.0000 RAMFPT 0.6941 1.0000 RMPTF1 0.7178 0.8087 1.0000 RFMPT 0.6721 0.7082 0.7440 1.0000 RKLSECI 0.6612 0.6771 0.7654 0.5403 1.0000 RKLSEP 0.6566 0.7593 0.8476 0.6524 0.8581 1.0000 Average Standard Deviation
-0.51%
-0.36%
-1.40%
-0.29%
0.45%
-0.02%
15.47%
9.98%
10.38%
14.08%
8.90%
12.09%
21
Table 4: List of Acquisition Event (A) Property Trust Sample (3) 1 AMANAH HARTA TANAH PNB 2 FIRST MALAYSIA PR.TRUST (B) Property Stocks Sample (24) 3 ANSON PERDANA 4 ASAS DUNIA 5 ASIA PACIFIC LAND 6 BANDAR RAYA DEV. 7 COUNTRY HEIGHTS HDG. 8 CRIMSON LAND 9 DAMANSARA REALTY 10 FARLIM GROUP (M) BHD. 11 HONG LEONG PROPS. 12 ISLAND & PENINSULAR 13 LAND & GENERAL 14 LIEN HOE 15 MK LAND HOLDINGS 16 PELANGI 17 SATERAS RESOURCES 18 SELANGOR PROPERTIES 19 SRI HARTAMAS 20 SUNRISE 21 WORLDWIDE HOLDINGS 22 YTL LD.&DEV.BHD.
Abbreviation AHTP FMPT
Sample Data Start Date 18-Dec-90 1-Jan-90
Event Date 21-May-96 28-Mar-96
News Source Business Times (M) Business Times (M)
DUFF ASAS ASIA BANA COUN MCBH DAMA FARL HOLE ISLP LGEN LIEN PEFF PELA SATA SELP SRIH SUNR WIDE TACO
1-Jan-90 25-Jan-95 1-Jan-90 1-Jan-90 18-Feb-94 1-Jan-90 1-Jan-90 26-Jul-95 1-Jan-90 1-Jan-90 1-Jan-90 1-Jan-90 15-Sep-93 1-Jan-90 1-Jan-90 1-Jan-90 1-Jan-90 6-Feb-96 18-May-90 1-Jan-90
11-Nov-96 26-Sep-97 18-Jan-99 3-May-99 24-Apr-97 12-May-00 14-Dec-96 19-Mar-97 2-Jun-00 28-Feb-02 17-Apr-96 14-Nov-97 11-Jul-00 24-Jan-97 12-Feb-97 7-Jul-97 23-Nov-96 2-May-97 9-Jan-02 5-Nov-98
Business Times (M) Business Times (M) Business Times (M) Business Times (M) Business Times (M) Business Times (M) Business Times (M) Business Times (M) The New Straits Times Business Times (M) The New Straits Times Business Times (M) Business Times (M) Business Times (M) Business Times (M) Bernama Business Times (M) Business Times (M) Business Times (M) Business Times (M)
@ Details of the individual acquisition are not included in the paper, and they will be made available upon request.
22
Table 5: Abnormal Returns Estimates and Hypothesis Tests for New Property Trust Listing Event Property Trust a) Average Prediction Errors and test statistics at specific event date Property Stock
Event Date
-D20 » -D10 » -D5 -D4 -D3 -D2 -D1 D0 +D1 +D2 +D3 +D4 +D5 » +D10 » +D20
Average Prediction Errors (APEqt )
Average Prediction Errors Standard (APEpt ) Deviation
Standard Deviation
t-statistics
t-statistics
Hypothesis 2(a)H0 : APEqj = APEpj t-statistics
0.0110
0.0205
4.1062*
0.0065
0.0055
2.0805*
0.3766
-0.0055
0.0173
-2.4033*
0.0240
0.0582
0.7153
-2.4752*
-0.0070 -0.0084 0.0031 -0.0061 -0.0017 0.0012 0.0007 0.0095 0.0100 -0.0087 0.0018
0.0124 0.0254 0.0204 0.0218 0.0206 0.0206 0.0179 0.0179 0.0252 0.0274 0.0194
-4.2623* -2.5270* 1.1457 -2.1436* -0.6430 0.4357 0.2867 4.0632* 3.0090* -2.4324* 0.7156
-0.0028 -0.0267 -0.0138 0.0045 -0.0227 0.0271 -0.0002 -0.0172 0.0199 -0.0134 -0.0031
0.0163 0.0244 0.0310 0.0066 0.0049 0.0207 0.0216 0.0232 0.0139 0.0086 0.0120
-0.2936 -1.8915 -0.7710 1.1906 -8.0484* 2.2651* -0.0170 -1.2880 2.4694* -2.6992* -0.4514
-0.5630 1.2123 1.3686 -0.8385 1.7460 -2.1221* 0.0830 2.5023* -0.6723 0.2914 0.4356
-0.0063
0.0272
-1.7782
0.0110
0.0067
2.8298*
-1.0935
-0.0006
0.0011
-4.5105*
-0.0002
0.0005
-0.7135
-0.6924
b) Cumulative Average Prediction Errors & Test Statistics Over Different Event Windows Cumulative Cumulative Event Average Average Window Prediction Hypothesis 1(a)- Prediction Hypothesis 1(b): Interval [t 1 , Errors Standard H0: CAPEqj = 0 Errors Standard H0: CAPEpj = 0 t2] (CAPEqs ) Deviation t-statistics (CAPEps ) Deviation t-statistics
[-20, +20] [-10, +10] [-5, +5] [-3, +3] [-20, 0] [-10, 0] [-5, 0] [-1, 0] [0, +1] [0, +5] [0, +10] [0, +20]
-0.0744 -0.0671 -0.0058 0.0165 -0.0037 -0.0229 -0.0190 -0.0006 0.0019 0.0144 -0.0431 -0.0695
0.1539 0.0900 0.0644 0.0506 0.1271 0.0647 0.0474 0.0275 0.0271 0.0439 0.0741 0.0978
-3.6822* -5.6804* -0.6838 2.4888* -0.2225 -2.6939* -3.0552* -0.1548 0.5211 2.5030* -4.4257* -5.4165*
-0.0727 -0.0827 -0.0484 -0.0024 -0.0364 -0.0486 -0.0343 0.0044 0.0269 0.0130 -0.0070 -0.0091
0.0867 0.0737 0.0358 0.0278 0.0336 0.0342 0.0438 0.0245 0.0143 0.0103 0.0534 0.0711
-1.4520 -1.9431 -2.3404* -0.1514 -1.8777 -2.4637 -1.3577 0.3124 3.2522* 2.1941* -0.2273 -0.2214
Hypothesis 2(b)- H0 : CAPEqj = CAPEpj t-statistics
-0.0196 0.2946 1.1309 0.6407 0.4422 0.6806 0.5462 -0.3069 -1.5797 0.0538 -0.8287 -1.1593
* 5% significance level
23
Table 6: Abnormal Returns Estimates and Hypothesis Tests for Acquisition Events Property Stock
Property Trust
a) Average Prediction Errors and test statistics at specific event date Average Average Prediction Prediction Errors Standard Errors Standard Event Date (APEqt ) t-statistics (APEpt ) Deviation Deviation
-D20 » -D10 » -D5 -D4 -D3 -D2 -D1 D0 +D1 +D2 +D3 +D4 +D5 » +D10 » +D20
Even Date
Hypothesis 4(a)H0 : APEqj = APEpj t-statistics
-0.0124
0.0280
-1.9763
0.0741
0.1243
0.8429
-2.9922*
-0.0061
0.0194
-1.4121
-0.0348
0.0218
-2.2606*
1.9771
0.0001 -0.0057 0.0061 0.0061 0.0031 0.0010 -0.0086 0.0024 -0.0145 -0.0070 0.0083
0.0350 0.0250 0.0216 0.0483 0.0281 0.0389 0.0183 0.0265 0.0226 0.0454 0.0390
0.0116 -1.0152 1.2639 0.5601 0.4906 0.1174 -2.0995* 0.4071 -2.8801* -0.6892 0.9496
0.0202 -0.0057 0.0075 -0.0182 -0.0152 -0.0043 0.0526 -0.0063 -0.0073 -0.0010 0.0111
0.0053 0.0056 0.0327 0.0217 0.0234 0.0367 0.0372 0.0645 0.0047 0.0210 0.0166
5.4129* -1.4330 0.3261 -1.1858 -0.9182 -0.1657 2.0008* -0.1392 -2.2166* -0.0704 0.9450
-0.7938 0.0005 -0.0868 0.6895 0.8830 0.1849 -4.1906* 0.3995 -0.4406 -0.1803 -0.0988
0.0037
0.0284
0.5905
-0.0035
0.0091
-0.5359
0.3500
-0.0016
0.0444
-0.1659
-0.0115
0.0240
-0.6791
0.3058
b) Cumulative Average Prediction Errors & Test Statistics Over Different Event Windows Event Window Interval [t 1 , t 2 ]
[-20, +20] [-10, +10] [-5, +5] [-3, +3] [-20, 0] [-10, 0] [-5, 0] [-1, 0] [0, +1] [0, +5] [0, +10] [0, +20]
Cumulative Cumulative Average Average Prediction Hypothesis 3(a)- Prediction Hypothesis 3(b): Hypothesis 4(b) - H0 : Errors Standard H0: CAPEqj = 0 Errors Standard H0: CAPEpj = 0 CAPEqj = CAPEpj (CAPEqs ) Deviation (CAPEps ) Deviation t-statistics t-statistics t-statistics
-0.0605 -0.0030 -0.0087 -0.0045 -0.0232 0.0097 0.0107 0.0041 -0.0076 -0.0184 -0.0117 -0.0363
0.1616 0.1311 0.0814 0.0852 0.1129 0.0956 0.0681 0.0391 0.0323 0.0493 0.0678 0.0883
-1.6744 -0.1021 -0.4798 -0.2338 -0.9196 0.4558 0.7015 0.4694 -1.0502 -1.6696 -0.7723 -1.8364
0.0374 -0.0484 0.0334 0.0088 -0.0670 -0.0820 -0.0156 -0.0195 0.0483 0.0446 0.0292 0.1001
0.0094 0.0176 0.0281 0.0204 0.0480 0.0379 0.0131 0.0133 0.0738 0.0516 0.0163 0.0941
5.6108* -3.8946* 1.6810 0.6113 -1.9750 -3.0570* -1.6781 -2.0697* 0.9249 1.2231 2.5316* 1.5053
-0.8381 0.4795 -0.7132 -0.2151 0.5341 1.3216 0.5325 0.8318 -2.1212* -1.7205 -0.8338 -2.0753*
* 5% significance level
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Figure 1: Historical Quarterly Returns of Listed Property Trusts 1990-2002 60% 50%
RAHPT
RAMFPT
RMPTF1
RFMPT
40% 30% 20% 10% 0% -10% -20% -30%
Q 40 1
Q 20 1
Q 40 0
Q 20 0
Q 49 9
Q 29 9
Q 49 8
Q 29 8
Q 49 7
Q 29 7
Q 49 6
Q 29 6
Q 49 5
Q 29 5
Q 49 4
Q 29 4
Q 39 3
Q 19 3
Q 39 2
Q 19 2
Q 39 1
Q 19 1
Q 39 0
Q 19 0
-40%
Note: The outliers in December 1993, which saw the property returns of AHTP shooting up to 490.9% and other two trusts recording 203.57%(FMPT) and 111.54% (AMFPT) respectively, were removed.
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