NAREIT T-Tracker Shows FFO Gains in 4th Quarter

In the latest edition of Fundamentally Speaking, Calvin Schnure, NAREIT’s senior vice president for research and economic analysis, said NAREIT’s T-Tracker series points to solid operating performances by REITs in the fourth quarter of 2015.

Funds from operations (FFO) continued to rise for most REITs, as did net operating income (NOI) and dividends paid, Schnure observed. Total FFO was $12.2 billion in the fourth quarter, a gain of nearly 10 percent from the fourth quarter of 2014. NOI rose 13 percent to $20.3 billion, and total dividends paid were $11.8 billion, a 5 percent increase from the year before.

FFO did fall on a quarterly basis for some REITs that had some significant impairment charges, Schnure pointed out. Excluding those charges, FFO gained 1.25 percent on a quarterly basis, he noted.

Self-storage REITs stood out in terms of same-store NOI (SSNOI) in the fourth quarter,  gaining 8.9 percent from the fourth quarter of 2014. SSNOI growth for manufactured homes rose 6.8 percent in the fourth quarter, while the apartment sector posted growth of 6.6 percent.

“Across the board, it reflects continued robust demand and limited new supply, so this is a very optimistic outlook for these sectors,” Schnure said.

Office REITs posted a 3.25 percent increase in SSNOI growth from a year ago; growth in the industrial REIT sector was about the same. Schnure pointed to some slowing in the SSNOI performance of health care REITs to about 1.5 percent, “which is about half the rate that we had seen previously.”

Meanwhile, the latest T-Tracker series data pointed to a marked slowdown of acquisitions in the fourth quarter, according to Schnure. This follows an active acquisitions market for most REITs in 2013, 2014 and the first half of 2015.

Self-storage and data center REITs were among the few purchasers of assets in the fourth quarter, Schnure noted. Many other REIT segments were net sellers, Schnure said.

The fourth quarter T-Tracker data also highlighted that occupancy rates have risen to record highs, Schnure said, which points to the potential for rent increase in the future.

“High occupancy rates really bode well for the sector in 2016,” Schnure observed.