The Efficiency Analysis of Singapore Real Estate Investment Trusts

Abstract

Since the REIT industry is relatively new in Singapore, the objective of this research is to examine the operation efficiency among firms in the industry through the method of Data Envelopment Analysis (DEA). In addition, the method of Tobit regression is applied to investigate the impact factors on efficiency. The results are as follows. First, none of 14 firms analyzed performs relatively efficiently based on the average efficiency scores over the sample periods of 2007 to first quarter of 2015. Nevertheless, it is found that First REIT and Suntec REIT are the most efficient and least efficient REITs respectively. Second, ROA is positively correlated to efficiency scores while the negative relationship is found with the debt ratio. Third, regarding property-type, retail REITSs perform better than commercial ones on average. However, the most efficient group is "others" which consists of one hospitality/residential REITs, one healthcare REITs, and three industrial REITs. Fourth, geographical diversification may not affect REIT's efficiency. Meanwhile, REITs holding more properties overseas perform better than their counterparts on average. Last, in regards to size, small-size REITs significantly perform better in efficiency than those in other categories. Especially, medium-size and largesize REITs do not have significant differences on average in efficiency.

Solutions for Thai Property Funds’ Performance Improvements

“…However, [24] found that there is no benefits from size for EU REITs, especially after the subprime crisis. In addition, Singapore REITs with midlarge size show insignificant differences on average in efficiency, unlike small size REITs as in [13].…”

Productivity assessment of the real estate industry in China: a DEA-Malmquist index

“…They prove that the overall inefficiency of LRECs is mainly caused by scale efficiency. Hui et al (2016) evaluate the operating efficiency of REITs in Singapore by using the CCR model and apply the tobit regression analysis to explore the influencing factors, which conclude that the return on assets is positively correlated with the operating efficiency of REITs but a negative relationship with the debt ratio. Second, with upgrading the DEA model, more evaluations involve real estate efficiency, mainly including cost efficiency, investment efficiency, sustainable efficiency, etc.…”

An empirical study on measuring operating efficiency and revenue of real estate assets in the UAE using data envelopment analysis

“…This could probably be because, in the past, most real estate portfolios were generally built on a small scale. Studies covering real estate markets like Germany (Schaefers, 2009), Singapore (Chiang et al , 2016), India (Roy and Kohli, 2016) and Taiwan (Hai-feng and Shuang, 2015) reach different conclusions with regard to capital expenditure (CAPEX) efficiency. For instance, CAPEX efficiency for real estate assets in Europe is moderately high (Hartmann, 2015).…”

“…These studies focused on the financial instruments related to real estate CAPEX and operational expenditure (OPEX) rather than the operational efficiency of the building assets. Furthermore, these types of empirical analyses are normally ex post analyses, which may only confirm the ex ante investment decisions (Chiang et al , 2016). However, as a result of special property characteristics (heterogeneous), there are a variety of problems in selecting the appropriate asset for investment.…”

“…Real estate performance is also analysed from a development and construction point of view (Jin et al , 2015). There is also an increased amount of research in real estate management from the perspective of financial investment and portfolio construction (Chiang et al , 2016). Ge and Guo (2014) pointed out that there is an increased number of real estate companies that are listed on the stock market.…”