This article is from the Australian Property Journal archive
US REITs raised their earnings in the fourth quarter of 2018, led by the family homes, industrial and infrastructure sectors.
According to the Nareit T-Tracker, funds from operations (FFO) for all equity REITs increased 7.4% over the 12 months, but FFO declined 3.2% when compared to the third quarter in 2018.
The occupancy rate for REIT-owned properties in the fourth quarter was 93.8%, the same as the fourth quarter of 2017, but slightly down from the record high of 94.2% in the third quarter of 2018. The occupancy rate for apartments remained at a record high of 96%, while the rate for the office sector rose to 93.4%, the highest level since the fourth quarter of 2001.
Total dividends paid in the 2018 fourth quarter were $13.9 billion, the same as the fourth quarter of 2017, but down slightly from $14.1 billion in the third quarter of 2017, due to timing issues.
Nareit president and CEO Steven A. Wechsler said REITs generated $15.9 billion in FFO and importantly, maintained solid balance sheets with low leverage. Interest expense as a percentage of NOI declined to a record low and the average debt maturity increased to 76 months – the longest in nearly 20 years.
Net Operating Income (NOI) was up 3.7% from the fourth quarter of 2017 and 1.2% from the third quarter of 2018. Same store NOI (SS NOI), which measures NOI generated by properties held for one year or more to factor out the effects of property acquisitions and dispositions, was up 2.2%, as the office, industrial, and manufactured homes sectors saw strong gains.
The sectors with the highest FFO gains over the prior year were specialty (44.8%); diversified (39.9%); infrastructure (35.7%); single family homes (32%); and industrial (31.4%).
During the quarter, REITs were the net sellers of properties, selling a net $2.9 billion, including $2.0 billion by office REITs, $1.0 billion by healthcare REITs, $0.7 billion by apartment REITs, $0.6 billion by lodging REITs and $0.5 billion by retail REITs.
Sectors with the strongest SS NOI gains included manufactured housing (7.1%); office (5.2%); and industrial (4.3%).
The Nareit T-Tracker also began tracking total property holdings, implied cap rates and dividend payout ratio in the fourth quarter. The new data reveal that total property holdings in 2018’s fourth quarter were $1.05 trillion, up from $395 billion in the same quarter a decade earlier.
REITs of all types collectively own more than $3 trillion in gross assets across the US. Listed REITs own approximately $2 trillion in assets and stock exchange listed REITs have an equity market capitalization of more than $1 trillion. In addition, more than 80 million Americans invest in REIT stocks.
Australian Property Journal
