REITs’ same store net operating income (SSNOI) remained positive in 2012 despite a less than robust economic recovery, according to Sam Wald, portfolio manager with Fidelity investments.
“One of the bigger surprises we think has been the health of the same store net operating income across the industry for 2012,” Wald said in an interview with REIT.com at REITWorld 2012: NAREIT’s Annual Convention at the Manchester Grand Hyatt in San Diego. “For example, the apartments are expected to have property growth in the same 7.5 percent range for 2012.”
Wald said he attributes this to the fact that real estate is a supply-and-demand business, and property supply levels are historically low.
“When supply is fairly low, it really doesn’t take all that much economic growth to generate fairly healthy earnings growth,” he said.
Approaching 2013, Wald said he’s “fairly positive” on the subsector of private pay senior housing. He said that while the sector is like many other property types in that the levels of new supply are fairly low, this subsector will particularly benefit, because senior housing demand is just beginning to recover.
“The demographics are that more and more people are getting older, particular in the 85-plus demographic, so they should have positive growth for a lot of years to come,” Wald said.
Additionally, he said he hopes 2013 will be more of a stock picker’s market. With macro issues arising, Wald said all investments tend to have higher volatility and higher correlation.
“So, over the past couple of years, REIT investors have had to worry about things like the U.S. debt ceiling, the U.S. fiscal cliff , China's growth slowing and the mess over in Europe just as much as on the underlying fundamentals on the property that the REITs own,” he said. “So, hopefully, some of these macro issues will settle down and 2013 will be more of a stock picker’s year.”