Financial Structure of REITs in Emerging Property Markets: An Assessment of N-REITs

Abstract

Purpose: The study assessed the financial structure of REITs in emerging markets, using the Nigerian Real Estate Investment Trusts (N-REITs) to provide relevant information to guide both foreign and domestic investors.  Design/Methodology/Approach: Secondary data obtained from the financial statement and annual reports of all the REITs companies in Nigeria namely Skye Shelter Fund, Union Homes REITs and UPDC REITs were used for the study. The study period covered from 2007 to 2016. Descriptive statistical tools such as frequencies, mean weighted scores and percentages were used in analyzing the data obtained for the study. Findings: The study revealed that UPDC REITs had the highest capital injected into the industry; hence it has the highest market capitalization. However the entire industry has a market capitalization of ₦41, 183, 684, 050 ($134.5 million) and a unit holders’ fund of ₦44,726,754,000 ($146.2 million) within the study period, this is considered quite small when put alongside REIT companies of other nations with substantial market capitalizations such as the US which had a market capitalization of about $977.9 billion and South Africa with market capitalization of about $21 billion. Similarly, the study revealed that the N-REITs has great potentials given that the direct property from which it derives its income is doing well in terms of return performance in the study area.Originality/Value: REITs in emerging property markets has not been sufficiently studied. This study provided empirical data from an emerging property market which can guide prospective investors from across the globe.

Keywords: Emerging markets, investment, market capitalization, real estate, structure.