Record-high occupancy rates and well-capitalized balanced sheets highlighted the U.S.-listed equity REIT industry’s strong fundamentals in the fourth quarter, Nareit reported this week.
According to the latest Nareit Total REIT Industry Tracker, funds from operations — an important measure of REIT performance — of equity REITs listed on U.S. exchanges totaled $15.1 billion in the fourth quarter, up 3.2% from the previous quarter and a 1.4% gain from the year-earlier quarter.
Nareit’s T-Tracker is a quarterly composite performance measure of the entire U.S.-listed REIT industry.
Occupancy rates for all equity REITs reached 93.8%, a 20-basis-point increase over the third quarter and the highest level in the 17-year history of the T-Tracker database.
Nareit reported that REITs had been proactively strengthening their balance sheets for the higher interest rate environment ahead. T-Tracker data showed that leverage dropped to a record low, with the debt-to-book assets ratio declining 95 basis points year-over-year to 47.6%.
Debt-to-market assets, which substitutes market cap for the book value of shareholders’ equity, were slightly higher than in the third quarter, at 34.7%, but remained near its lowest level of 32.7% recorded in mid-2016.
According to Nareit, REITs have locked in low interest rates far into the next decade, with the weighted average maturity of their debt at 75.1 months. Interest expense as a share of net operating income was 22.3%, close to its record low of 21.7%.