This article is from the Australian Property Journal archive
US equity REITs have reduced their debt levels to record lows, shoring up their balance sheet for “whatever economic conditions may lie ahead”, according to Nareit.
The latest Nareit Total REIT Industry Tracker Series shows earnings for equity REITs grew at 2.8% in the second quarter of 2019 over the prior quarter.
Funds from operations (FFO) totalled US$16.5 billion, a 2.8% increase from the first quarter of 2019 and is 0.7% higher than one year earlier. Net operating income totalled US$24.8 billion, 2.4% higher from last quarter but down 0.1% from the second quarter of 2018.
The top-performing equity REIT property segments were manufactured homes (6.1%), single family homes (5.3%), office (4.9%), and industrial (4.4%).
The industrial sector had the most significant increase in second quarter FFO, rebounding from negative growth last quarter to 16.6% growth this quarter.
Nareit president and CEO Steven A. Wechsler said REIT earnings growth is accompanied by a rising development pipeline and increasing net acquisitions, all taking place when the balance sheet of the entire industry is stronger than its ever been.
This growth took place at the same time REITs’ debt to market assets ratio dropped to 32.5%, a record low. The industry’s weighted average interest rate on long-term debt fell below 4%. The average term to maturity for REIT-held debt rose to 78 months, the longest since 2001.
“The REIT industry is well prepared for whatever economic conditions may lie ahead.” Wechsler said.
Occupancy rates for REIT-owned properties remained steady and high with most sectors near or at 95%. Total occupancy for all sectors is at a record high of 94.1%. Office REITs rose to 93.9%, the highest level since the beginning of 2002, and apartment REIT occupancy remained steady at 95.7%.