REIT Returns: New Urbanism vs. Traditional Developments

Open Access
Author:
Gerhardt, Christopher Mark
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • David Shapiro, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • Finance
  • Real Estate
  • New Urbanism
  • Real Estate Investment Trusts
  • Stock Returns
Abstract:
This paper looks at changes during the past five years in stock prices of a sample of Real Estate Investment Trusts (REITs) traded on American exchanges after the acquisition of two different kinds of residential properties is publicly announced. The stock returns associated with two styles of design, New Urbanism developments and traditionally built developments, are calculated to better understand the implications such information can have on investors and REIT executives, among others. This paper tests the hypothesis that real estate developments that incorporate New Urbanism principles yield larger Real Estate Investment Trust (REIT) stock returns than developments that feature traditional building principles. A further understanding of REITs, New Urbanism, and traditional design principles is covered, followed by a literature review of previously conducted studies on REITs and the value and cost of New Urbanism. Among the figures calculated and tests run to gauge and understand the difference in returns are percent change tests, standard deviations, confidence intervals, and two independent sample T-Tests. Finally, an interpretation of the study’s findings is made, as well as recommendations about how to continue and improve upon the study’s conclusions.