East Vs. West of Property Investing. Will the Two Meet?
US real-estate investment trusts prefer internal managers, but Asian REITs mostly outsource the job. A Singapore activist investor is pushing for convergence.
Closing the gap.
Photographer: Wei Leng Tay/BloombergAn activist shareholder’s campaign to sack the external manager at a small Singapore real-estate investment trust has shone the spotlight on the industry’s East versus West split, with important consequences for future returns. REITs in most parts of Europe and North America are typically managed internally, while those in Asia prefer to outsource the job to a firm owned by their sponsors. Which model is superior?
The evidence is far from conclusive. An Ernst & Young study found 240 basis points of annual outperformance in favor of internal management, but it also said that the opposite holds true for smaller US REITs with under $2 billion in assets.