An exploratory study of the performance characteristics of the property vehicles listed on the New Zealand stock exchange (NZX)

Abstract

There are two listed property investment vehicles on the New Zealand Stock Exchange (NZX), namely Listed Property Trusts (LPTs) and Listed Property Investment Companies (LPICs). The proportion of New Zealand LPTs to LPICs has varied over the years. The more recent trend for LPTs to corporatise has resulted in a significant reduction in the number of Trusts on the NZX in 2010 and has encouraged two further Trusts to consider corporatising in 2012. The objective of this exploratory study was to determine whether LPTs performed differently to LPICs in order to determine if LPTs should be treated as a separate asset class. The study developed separate performance indices for the LPTs and LPICs in order to examine the performance characteristics of these property vehicles over the study period December 1993 to September 2011. The effect of different market conditions on the performance of these vehicles was also assessed by analysing the performance of LPTs and LPICs over specified sub-periods. Data for this study were sourced from the following databases: NZX Company Research, RBNZ, and PCNZ/IPD. The results revealed that the performance characteristics of these two entities differed over the study period December 1993 to September 2011, which suggests that LPICs and LPTs can be treated as separate asset classes. However performance analysis of these entities over the three sub-periods (pre-Asian crisis, post Asian crisis to pre-GFC, and post-GFC) showed that the differences between LPTs and LPICs reduced post-GFC, and that the performance characteristics of these entities are now more aligned.