U.S. Equity REITs Report Total 3Q FFO of $15.8 Billion

Occupancy Rates Remain Near Record High While Leverage Reaches New Low 

WASHINGTON, D.C. November 12, 2019 – Earnings for all U.S. Equity REITS declined 3.5% to $15.8 billion in the third quarter of 2019, according to the Nareit Total REIT Industry Tracker Series (T-Tracker®) report released today. Industry results were reduced by a significant charge to earnings by one REIT to settle litigation that originated prior to the current year. Total funds from operations (FFO) excluding this charge would have been $16.6 billion, a 1.2% increase over the second quarter and 1.8% higher than the third quarter one year ago.

“The REIT industry’s consistent high earnings and near-record occupancy rates this year indicate that the REIT expansion is continuing,” said Nareit President and CEO Steven A. Wechsler.

Most REIT sectors posted increases in earnings.Industrial, residential and self-storage REITs continue to show strong increases in earnings reporting a 5.3%, 5.2% and 5.9% change over Q2, respectively. Infrastructure and data center REITs posted modest increases after several years of strong growth at 2.8% and 2.1%, respectively, with retail REITs showing improved earnings growth at 5.0% after little change in the second quarter.

Occupancy rates for REIT-owned properties remained near record highs with overall occupancy rates at 93.9%. Most major property sectors saw a slight decline in occupancy rates from the prior quarter, while occupancy rates rose in the Industrial sector to 96.3%.

Additional results from the Q3 T-Tracker show balance sheets remain solid with low exposures to interest rates. Leverage ratios were little changed from Q2 on a book value basis but moved to a new low on a market assets basis. REITs have extended the weighted average term maturity of their debt to 82.8 months, or nearly seven years, from 75 months at 2018:Q4.

Growth of Same-store Net Operating Income (SS NOI),which measures NOI generated by properties held for one year or more, decelerated to 1.9% in Q3, compared to growth of 2.4% through Q2. Health Care REITs were the only sector to post faster growth than they did in in Q2 at 1.7%.

“There are few signs of late-cycle weakness in REIT operating results, with two-thirds of REITs reporting higher FFO than a year ago,” said Calvin Schnure, Nareit Senior Vice President of Research and Economic Analysis. “REIT balance sheets are strong and interest rate exposures are low.”

Q3 T-Tracker data also show a rebound in net acquisitions. REITs bought a total of $18.8 billion of properties in the first three quarters of this year, the strongest performance since 2015. Q3 net acquisitions totaled $4.9 billion.

 

Read the complete Q3 2019 Nareit T-Tracker results 

 

About the Nareit T-Tracker

The Nareit Total REIT Industry Tracker Series provides investors with the total quarterly operating performance of the U.S.-listed equity REIT industry, as well as the total dividend performance of equity and mortgage REITs. The series includes the Nareit FFO Tracker, the Nareit NOI Tracker and the Nareit Dividend Tracker.

The Nareit FFO Tracker measures reported funds from operations (FFO) for REITs in the FTSE Nareit All Equity REITs Index. FFO is a non-GAAP measure that is roughly equal to a REIT's GAAP net income excluding real estate depreciation and gains or losses from sales of property. REITs generally adhere to the Nareit definition of FFO in their SEC filings.

The Nareit NOI Tracker measures reported net operating income (NOI) for REITs in the FTSE Nareit All Equity REITs Index. NOI is a non-GAAP measure that equals gross operating income provided by the property (rental income as well as fees and other revenues) less property operating expenses, including utilities, management fees, insurance, and property taxes, but excluding interest and principal payments on debt, income or franchise taxes, capital expenditures and depreciation.

The Nareit Dividend Tracker monitors reported common dividends paid by REITs in the FTSE Nareit All Equity REITs Index and the FTSE Nareit Mortgage REITs Index – the total amount of all dividends paid to investors in common stock of these stock exchange-listed REITs.

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