From a small northwestern observatory…

The National Association of Real Estate Investment Trusts (NAREIT) has rolled out a new quarterly publication called the NAREIT T-Tracker Results. Designed for the serious REIT investor or researcher, it lays out in significant detail comparative data on three important indicators: Funds from Operations (FFO), Net Operating Income (NOI), and Dividends Paid. It then goes on to report comparative data on a host of secondary measures, such as Same Store NOI (SS NOI), Occupancy Rates, Acquisitions and Dispositions, the Development Pipeline, Total Property Holdings, Price to FFO Ratios, and miscellaneous other financial indicators. The T-Tracker breaks down data by REIT sector and reports on a quarterly basis. The most recent issue, released in November, was for 3-Q 2022. We expect 4-Q 2022 data later this month. Data is also presented graphically over a multi-year time frame (broken down quarterly) to aid in spotting trends by sector.

For example, the key FFO metric has shown decidedly upward trends across the REIT universe for the past twenty years, with noteworthy declines surrounding the 2009-10 recession (with negative FFO in the industrial sector in three quarters) and several quarters of negative FFO in the hospitality sector during the pandemic.

By comparing both longitudinal trends and cross-sectional data across sectors, some interesting patterns emerge. For example, for about 20 years, property acquisitions have generally (but not always) exceeded dispositions, although there is no discernable trend over time.

However, when we break this down by sector, different patterns emerge. Somewhat surprisingly, the largest number of dispositions in 3-Q 22 were in the Self-Storage sector, and while Lodging/Resorts was almost entirely marked by dispositions, the aggregate value of those dispositions was only about a third of that seen in the Self-Storage arena.

I’ll keep you informed when the 4-Q 2022 data comes out. While this may seem like so-much inside baseball for REIT geeks, the importance of real estate in a well-balanced portfolio cannot be overstressed. All too many investors and investment advisors really do not understand the real estate sector, and the T-Tracker will go a long way to help with that.

As always, if you have any questions about this or any other real estate economics/finance topic, please let me know!

John A. Kilpatrick, Ph.D., MAI — john@greenfieldadvisors.com