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REIT Fundamentals Show Promising Signs, Analyst Says

02/05/2014 | By Allen Kenney

Keven Lindemann, director of research firm SNL Financial’s real estate group, joined REIT.com for a video interview to discussed his firm's latest projections for REIT operating performance in 2014 as well as how the industry performed in 2013.

Lindemann said he REITs' expected funds from operations (FFO), among other metrics, look promising.

"Growth is actually expected to be pretty solid," said Lindemann, referring to estimates for the rest of 2014. "When we look at FFO-per-share estimates and year-over-year growth projections, we're looking at right around 7.5, 7.6 percent. FFO-per-share growth across the entire equity REIT universe is actually quite solid."

Lindemann compared the 2014 estimates to more recent years.

"Over the past five or six years, we've seen several years of contraction," he noted. "In (2008 to 2010), REITs' FFO per share actually shrunk, so it has been a nice turnaround since then. I would say the fact that the companies are able to grow by mid-single digits in the face of not a ton of new demand coming with economic growth is a positive indicator."

Lindemann also reviewed the REIT market's performance in 2013 relative to the previous year.

"It was about the same," he said. "Growth is slowly picking up if we look across the entire REIT universe across all property types."

However, expected performance "varies dramatically" between property sectors, according to Lindemann.

"Your newer specialty property types are expected to grow by double digits in 2014," he said. "At the other end of the spectrum, some of your more traditional property types are actually going to grow a lot slower."