Cross-listing of real estate investment trusts (REITs)

Publication Date07 August 2017
Date07 August 2017
AuthorKim Hin David Ho,Kwame Addae-Dapaah,Fang Rui Lina Peck
SubjectProperty management & built environment,Real estate & property,Property valuation & finance
Cross-listing of real estate
investment trusts (REITs)
Kim Hin David Ho
Department of Real Estate, National University of Singapore, Singapore
Kwame Addae-Dapaah
The Bartlett School of Planning, University College London, London, UK, and
Fang Rui Lina Peck
Department of Investment Sales, Jones Lang LaSalle Ltd, Singapore
Purpose The purpose of this paper is to examine the common stock price reaction and the changes to the
risk exposure of the cross-listing for real estate investment trusts (REITs).
Design/methodology/approach The paper adopts the event study methodology to assess the abnormal
returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets
are examined, via a modified two-factor international asset pricing model. A comparison is made for two
broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts
from institutional differences.
Findings Cross-listed REITs generally experience positive and significant ARs throughout the event
window, implying significant superior returns associated with the cross-listing for REITs. On systematic
risks, REITs exhibit significant decline in their domestic market βcoefficients after the cross-listing. However,
the foreign market βcoefficients do not yield conclusive evidence when compared across the sample.
Research limitations/implications Results are consistent with prudential asset allocation for potential
diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant
than changes in the foreign market beta.
Practical implications The results and findings should incentivise REIT managers to explore viable
Social implications Such cross-listing for REITs should enhance risk diversification.
Originality/value This is a pioneer study on cross-listing of REITs. It provides a basis for investment
decision making, and could provoke further research and discussion.
Keywords Asia, REITs, Event study methodology, Cross-listing, International asset pricing model,
USA and Europe
Paper type Research paper
The real estate investment trust (REIT) sector has witnessed rapid growth and heightened
interest in the developed and emerging countries. According to information at
(downloaded on 27 April 2016), the FTSE EPRA/NAREIT Global Real Estate Index included
487 publicly listed real estate companies in 38 countries worldwide as of 30 September 2015.
Equity REITs accounted for 79 per cent of the $1.2 trillion ($948 billion) Developed Markets
Index equity market capitalisation as of 30 September 2015. This shows a 66.9 per cent growth
in the market capitalisation of $568 billion reported by Ernst and Young (2010). Furthermore,
rapid globalisation in the financial markets as a result of the deregulation of the markets fuelled
cross-listing of securities (Gagnon and Karolyi, 2011). Proliferati on of cross-listings has resulted
in intense competition among the major securities markets to attract and retain listings to
provide investors with a wider range of investment products. Although research findings are
somewhat mixed, there appears to be a general consensus among most researchers that
cross-listing enables companies and investors worldwide to connect seamlessly across
geographical boundaries and time zones, and helps to raise capital at a relatively lower cost
(Dodd, 2013) by breaching the barriers posed by market segmentation (Stapleton and
Subrahmanyam, 1977) and providing diversification benefits.
Journal of Property Investment &
Vol. 35 No. 5, 2017
pp. 509-527
© Emerald PublishingLimited
DOI 10.1108/JPIF-08-2016-0063
Received 12 August 2016
Revised 25 March 2017
26 April 2017
Accepted 26 April 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
of REITs
Given the benefits of cross-listing, and REITs being characteristically capital intensive
and heavily reliant on leverage, one would have expected REITs markets to have warmed
up to cross-listing. The sluggish attitude of the REIT market towards cross-listing could be
due to uncertainties about the probability of translating the benefits of cross-listing to the
REIT market which could be a function of lack of research on the issue as none of the extant
literature relates to REITs which is a distinct asset class. Therefore, given the robust growth
of the REIT sector and cross-listing becoming readily accessible worldwide, it may be timely
to explore the potential benefits of cross-listing to REITs to provide a basis for REITs fund
managers and investors in making informed investment decisions; and for governments in
regulating capital flows. A secondary motive is to provoke research and debate among real
estate academics and practitioners. Thus, the paper applies the literature on cross-listing to
examine the markets reaction to cross-listed REITs. This will be done by answering the
following questions:
Does cross-listing lead to superior returns for REITs in general?
Does cross-listing lower REITsdomestic marketsrisk?
Does cross-listing lower REITsforeign marketsrisk?
These questions are explored and empirically analysed and discussed to ascertain their
implications for REITs fund managers and investors. Furthermore, the impact of the two
main cross-listing vehicles, depository receipts (DRs) and dual ordinary listings (DOLs), are
compared to ascertain their relative performances in relation to the three questions that the
paper sets out to answer. The paper is organised as follows. The next (second) section
provides an overview of cross-listing. This is followed by literature review (third section)
while the fourth section deals with data collection and the empirical methodologies adopted
for the study. The fifth section is a discussion of the results and findings while the last
section provides concluding remarks.
Overview of cross-listing
The cross-listing concept has been in existence for more than a century (Sarkissian
and Schill, 2009) although its popularity increased exponentially only in recent decades.
Cross-listing involves at least two markets, with a debut primary listing typically in the
country of incorporation (often referred to as the home/local market). This type of
cross-listing is often called DOL. An example of a DOL REIT is the Singapore listed Fortune
REIT, which chose to dual list on the Hong Kong Stock Exchange. Table I provides a list of
REITs that were concurrently listed on two exchanges at the time of the research.
First listing Dual listing
1. Associated Estates Realty
New York Stock
11 November 1993 NASDAQ 5 June 2008
2. Fortune Real Estate
Investment Trust
Singapore Stock
12 August 2003 Hong Kong Stock
20 April 2010
3. Intercapital Property
Development REIT
Bulgaria Stock
5 November 2005 Warsaw Stock
11 August
4. Montea SCA Euronext Brussels 17 October 2006 Euronext Paris 2 January 2007
5. Unibail-Rodamco
SE (merger)
Euronext Paris 22 June 2007 Euronext
22 June 2007
Note: This list excludes REITs concurrently listed prior to their conversion to REITs (in cases where REIT
legislation was introduced later)
Source: AuthorsCompilation
Table I.
List of REITs
concurrently listed
on more than
one stock exchange

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