WASHINGTON, DC—REITS took a half-step backward in the third quarter, with funds from operations declining 4.5% from Q2's record levels to $14.8 billion, Nareit said Tuesday. On a year-over-year basis, though, the total FFO for listed REITs was up 7.8%, and other Q3 metrics represented gains.
Nareit's quarterly Total REIT Industry Tracker Series showed that occupancy rates for all equity REITs rose 50 basis points in Q3, achieving a record high of 94.0% across the industry. For retail REITs in particular, the 50-bp increase brought 95.7%.
Accordingly, same-store NOI was up from the year-ago period, although the 3.2% Y-O-Y gain was little changed from Q2's increase of 3.3%. REIT segments posting the highest levels of SSNOI growth from the year-ago period included manufactured homes (7.1%); diversified (7.0%); single-family homes (6.8%); and industrials (4.7%). Total NOI dipped 1.5% from Q2, although Q3 NOI was up 6.9% from a year ago.
“The REIT industry delivered stable operating results in the third quarter, with total FFO of nearly $15 billion, high occupancy rates and year-over-year growth of same-store NOI,” says Steven A. Wechsler, president and CEO of Nareit. “This sound operating environment is enabling REITs to reward investors with a growing level of dividends.” Dividends paid by equity REITs and mortgage REITs totaled $12.8 billion, an increase of 0.6% from Q2 and 4.1% from Q3 2016.
“REITs have strengthened their balance sheets by raising $38 billion of common and preferred equity in the first three quarters of 2017, which exceeds the full-year total equity capital raised for the past several years” says Calvin Schnure, Nareit's SVP of research & economic analysis. “Total shareholder equity has risen to 44.5 percent of total assets, more than 12 percentage points higher than a decade ago. These solid positions help make REITs a stable investment while also preparing for future growth.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
