The Asia Pacific Real Estate Association (APREA), which promotes and represents the real estate asset class in Asia, this week launched a corporate governance index for REITs in Asia. This initiative is part of a major ongoing study of corporate governance in listed real estate vehicles in Asia.
The index was developed by Patrick Lecomte of ESSEC Business School in Singapore, with the first S-REIT (Singapore) corporate governance index produced in 2010. The construction of the index was subsequently modified by Universiti Teknologi MARA in Malaysia and Waseda University in Japan. Work is currently under way to develop a similar index in Hong Kong.
Peter Mitchell, CEO of APREA, commented, “As the REIT regime has been expanding globally, best corporate governance practices in Asian REIT markets have become a focus for domestic and international investors alike. It is intended that the index will encourage best corporate governance practice and so in turn enhance the transparency and coherence of the sector as a whole, thereby playing an important role in attracting global capital flows into the Asian listed property sector.”
Framework
The scoring framework encompasses 27 governance factors spanning eight categories of corporate governance. The eight categories listed in order of their weightage on the overall score are fees, board matters, related party transactions, REIT organization, remuneration matters, audit committee, gearing and ownership.
Mitchell added, “The final construction of the index and calculation methodology is the result of liaison and consultation with many REITs around the region. It is intended that the index will be calculated yearly.”
Leading index rankings
The Singapore index is now in its third year and the top quartile rankings for each year are as follows:
The Malaysian index is in its second year and the top quartile rankings for each year are as follows:
The Japanese version of the index has just been finalised and the initial top quartile rankings are as follows:
Mitchell said, “While at this stage individual scores aren’t released, it is pleasing to see that over the three years that the index has been running in Singapore the overall average score has increased significantly each year. The average score increased by 32% in the second year and by a further 25% in the third year. The movements in rankings we see in each year are due to some REIT scores increasing faster than others.”
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