Longitudinal Study Of The Significance Of Trusts And Companies Listed On The New Zealand Stock Exchange Under The Property Sector.

According to economic theory the ownership structure of an entity impacts on its governance, behaviour, and performance. Globally, governments and investors have been demanding that Listed Property Vehicles (LPVs) improve these attributes, and as such, such entities have adopted Real Estate Investment Trust (REIT) structures or other optimal structures, such as a Stapled Security structure. Following this global trend, New Zealand’s LPVs – generally considered by investors to be the equivalent of REITs - began focusing on their ownership structures, including unit trust and company structures. This focus has more recently resulted in a number of the listed property trusts converting to company structures. The purpose of the longitudinal study is to examine the composition (types of ownership structures: during the 30 years to November 2013) and the significance (market capitalisation: during the 20 years to November 2013) of the New Zealand Stock Exchange (NZX) Property Sector, which was established in April 1982. Constituents of this Sector were initially established as companies and it was not until December 1993 that unit trust structures emerged: trusts and companies have continued to contribute to the value of the NZX Property Sector since December 1993. Methodology for this study involved developing three new monthly market capitalisation series over the study period for the Listed Property Trusts (LPTs), the Listed Property Investment Companies (LPICs), and the overall LPV Sector. Data for these series and for the existing monthly NZX All market capitalisation series were sourced from the NZX. Comparative analysis undertaken between these series demonstrate that the LPV Sector is now a major NZ asset class - having grown in significance and now accounting for approximately 9% of the value of the NZX. Indeed, companies presently make a greater contribution than trusts to the value of the overall LPV Sector. Further, the results highlight that the Property Sector was dominated by companies from December 1993 to 1999, at which point the trusts, having matured and grown in number, became the dominant sub-sector for the next 13 years (until June 2013). These findings reveal the major contribution that trusts and companies have made to New Zealand’s listed property market. It provides government, investors, LPVs and researchers with a better understanding of the historical significance of these listed property ownership structures.