AN EXAMINATION OF THE SIGNIFICANCE OF 'GREEN' BUILDINGS AND REIT (REAL ESTATE INVESTMENT TRUST)'S PERFORMANCE

Abstract

Extensive research has been conducted to study the impacts of ‘green’ buildings at the asset level using panel data. However, there is a lack of studies conducted at the Real Estate Investment Trust (REIT) level using primary data. As such, this dissertation’s study seeks to examine the significance of ‘green’ buildings on the operational and financial performance of REITs. To augment such an examination, the study was carried out to cover different property sectors, namely office, retail and residential, for the REITS concerned to evaluate the consistency of the results.

The 3 most popular and large publicly listed K-REIT Asia (K-REIT), Capitamall Trust (CMT) and City Developments Limited (CDL), representing largely the office, retail and residential REITS in Singapore respectively, were the study subjects. Subsequent time-based ordinary least-square regression models per trust were adopted to estimate the measurements of REIT performance – return on assets (ROA), the ratio of funds from operation to total revenue (FFO/Total Revenue) and return on equity (ROE) – against the ‘green’ variables. It is found that properly certified and measured ‘green’ buildings have significant impacts on REIT performance for both the K-REIT and CMT but no such significant impacts are found for CDL. It is also found that the results for K-REIT differ from those for CMT and that different measures of ‘green’ buildings in a REIT’s portfolio should have different impacts on REIT performance. The study has also produced meaningful insights as to how the different REIT managers should invest in ‘green’ properties to create value for investors.