Rents Paid, Dividends Raised

Summary

  • Nearly 200 REITs have reported earnings results over the past two weeks, providing critical information on the state of the real estate industry heading into year-end.
  • Results were generally better-than-expected with roughly 90% of equity REITs beating consensus FFO estimates while more than 75% of the REITs that provide forward guidance boosted their full-year outlook.
  • Self-storage REITs were again the upside standouts in Q3, raising their full-year FFO growth outlook by another 500 basis points to nearly 25% following a similarly-sized upward revision in Q2.
  • Results from residential REITs were most striking, however, with rent growth now well into the double-digits across the country. Average new lease rates for apartments and SFRs soared over 20% in Q3.
  • Among the "reopening sensitive" sectors, retail REITs reported solid results - even the flagging mall sector. Office and hotel REIT results were decent, while senior housing and SNF results weren't as poor as feared.

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Real Estate Earnings Recap

REIT earnings recap

Rents Paid, Dividends Raised. Nearly 200 REITs have reported earnings results over the past two weeks, providing critical information on the state of the real estate industry heading into year-end. Following a historically strong second quarter of earnings results and despite heightened expectations, REIT results were once again generally better-than-expected with roughly 90% of equity REITs beating consensus FFO estimates while more than 75% of the REITs that provide forward guidance boosted their full-year outlook while another dozen REITs added their names to the swelling list of 120+ dividend hikes this year.

REIT earnings scorecard 2021

Self-storage REITs were again the upside standouts in Q3, raising their full-year FFO growth outlook by another 500 basis points to nearly 25% following a similarly-sized upward revision in Q2. Results from residential REITs were most striking, however, with rent growth now well into the double-digits across the country. Average new lease rates for apartments and SFRs soared over 20% in Q3. Among the "reopening sensitive" sectors, retail REITs reported solid results - even the flagging mall sector. Office and hotel REIT results were decent, while senior housing and SNF results weren't as poor as feared.

REIT performance

With real estate earnings season now essentially complete - sans a handful of stragglers that report results next week - we compiled the critical metrics across each real estate property sector and provide our "quick take" commentary from the third quarter and will begin our quarterly REIT Rankings series next week on our new Income Builder Marketplace service.

Retail REIT Earnings Recap

Malls: (Final Grade: B) Signs of life? Simon Property (SPG) surged after reporting solid results and hiking its dividend for the fourth time this year as rent collection has fully normalized. SPG reported that its same-store NOI soared 24.5% in Q3 and now sees full-year FFO growth of 27.3% - which puts it within 5% of its pre-pandemic FFO for full-year 2019. Tanger Outlet (SKT) also rallied after reporting that hiking its full-year FFO growth outlook by 890 basis points and reporting improving leasing metrics while Macerich (MAC) boosted its FFO guidance by 450 bps. However, Pennsylvania REIT (PEI) - the lone lower-productivity mall REIT left standing - reported that it's still struggling to collect nearly 10% of its current-quarter rents.

mall leasing spreads

Shopping Center: (Final Grade: B+) Shopping center REITs reached full "normalizing" in rent collection in early 2021 and another solid quarter of results now has much of the sector within shouting distance of pre-pandemic FFO. Positive standouts included Federal Realty (FRT) which reported a 15.8% jump in its same-store NOI and raised its outlook by 970 bps to 25.0% - putting it back within about 10% of pre-pandemic levels. Regency Centers (REG) reported a 24.4% surge in same-store NOI and following another 500 bps guidance boost, REG will almost certainly be the first shopping center REIT to fully recover to its pre-pandemic FFO level.

shopping center REITs

Net Lease: (Final Grade: A-) Following a lackluster Q2, net lease REITs got back to business in Q3 with strong beat-and-raise reports from the "Big 3" net lease REITs with STORE Capital (STOR) and National Retail (NNN) leading the way with upward revisions to FFO growth of 190 bps and 180 bps, respectively while Realty Income (O) hiked its FFO growth outlook by 50 bps. Getty (GTY) was also an upside standout, boosting its full-year FFO growth outlook to 5.5% - up 190 basis points from last quarter - and also boosting its dividend by 5.1%. EPR Properties (EPR) - which was among the hardest-hit REITs by the pandemic - boosted its full-year outlook by nearly 1,000 bps and reported significant progress in rent collection.

net lease REITs

Residential REIT Earnings Recap

Apartment: (Final Grade: A) Renters should prepare for an unwelcome surprise with their next renewal offer as rents are soaring across essentially all major multifamily and single family markets across the country. Led by Mid-America (MAA), and NexPoint Residential (NXRT), sunbelt apartment REITs saw an acceleration in rent growth into early Q4 with new lease rates soaring nearly 25% in October. While coastal apartments had lagged early in the pandemic, there's nowhere to hide from rising rents as Essex (ESS), Equity Residential (EQR), and AvalonBay (AVB) each reported double-digit rent growth on new leases in Q3. Each of the eleven multifamily REITs raised their full-year NOI outlook while ten of the eleven raised their full-year outlook.

apartment reits earnings

Storage: (Final Grade: A+) Closely linked to the performance of the surging multifamily markets, one of the lasting storylines of 2021 will be the incredible rebound in the self-storage sector. Coming off the most comprehensive "beat and raise" quarter for any REIT sector in recent memory, storage REITs again delivered substantial upward guidance revisions. Led by strong upward revisions from Public Storage (PSA) and Extra Space (EXR) FFO growth now expected to average nearly 25% in 2021 - up another 500 basis points from last quarter while same-store NOI is expected to rise 16.5% this year - up another 300 bps from last quarter.

storage REIT FFO growth 2021

Single Family Rental: (Final Grade: A) Not to be outdone by their multifamily peers, Invitation Homes (INVH) and American Homes (AMH) each reported another stellar quarter and raised their full-year guidance across the board. New lease rates soared more than 15% in Q3 - the highest on record. INVH boosted its full-year FFO growth outlook to 18.5% - up 560 basis points from its prior outlook and also raised its full-year same-store NOI target by 200 basis points to 9.0%. AMH raised its full-year FFO growth outlook to 17.2% - up 340 basis points from its prior outlook and also raised its full-year same-store NOI target by 200 basis points to 8.0%.

single family rents

Manufactured Housing: (Final Grade: A+) MH REITs reported yet another stellar quarter of results as the best-performing REIT sector of the past half-decade has somehow strengthened even further this year. Sun Communities (SUI) boosted its full-year FFO growth outlook to 27.1% - up 310 basis points from its prior outlook - and boosted its full-year NOI growth outlook to 11.0% - up 70 basis points from its prior outlook. Equity LifeStyle (ELS) raised its full-year NOI guidance to 8.4% - an increase of 50 basis points - and its FFO outlook by another 140 basis points to 15.2%. UMH Properties (UMH) - while not providing guidance - reported very strong results with its FFO growth on pace to easily exceed 30% this year.

manuactured housing

Healthcare: (Final Grade: B) Senior housing and Skilled Nursing REITs were an area of concern heading into Q3 earnings season following the "fourth wave" of COVID in late summer. For senior housing, Welltower (WELL) noted continued signs of improvement in senior housing trends despite the COVID acceleration as occupancy rates increased 210 bps in Q3, exceeding its initial guidance of an approximate gain of 190bps. SNF REITs Omega Healthcare (OHI) and Sabra Health Care (SBRA) confirmed that several operators continue to face financial difficulties as government stimulus funds have dried up, but note that property-level fundamentals continued to improve.

healthcare REITs 2021

Technology & Logistics Earnings Recap

Industrial: (Final Grade: A) Supply chain woes did little to slow down the red-hot industrial REIT sector, which reported that demand for logistics space remains insatiable as businesses scramble to strengthen their supply chain. Upside standouts included Rexford (REXR), which boosted its full-year FFO growth outlook by 830 basis points to 21.6%, EastGroup (EGP), which raised its outlook by 280 bps to 12.1%, and Prologis (PLD) which now sees 8.4% FFO growth this year. Cold storage operator Americold (COLD) - which downwardly revised guidance from September - continues to be the lone REIT that has been negatively impacted by widespread goods shortages.

industrial REITs

Data Center: (Final Grade: B-) The third-weakest-performing REIT sector this year, Q3 results were lukewarm as somewhat disappointing results from Equinix (EQIX) followed otherwise solid results in the prior week from Digital Realty (DLR.PK), CyrusOne (CONE), and CoreSite (COR). Together with Iron Mountain (IRM), data center REITs reported that incremental leasing activity - the most closely watched earnings metric - was essentially in line with Q2 despite concerns that ongoing chip shortages may put downward pressure on data center demand. DLR and CONE hiked their full-year FFO growth guidance by 80 bps and 120 bps while EQIX and COR maintained their outlook.

data center leasing

Cell Tower: (Final Grade: B+) Three of the four cell tower and fiber REITs boosted their full-year outlooks in Q3, led by American Tower (AMT), which lifted its full-year AFFO growth outlook to 13.5% - up 160 bps from last quarter - powered by growth in its international markets. Crown Castle (CCI) maintained its full-year revenue and FFO outlook but hiked its dividend by 11%. SBA Communications (SBAC) and Uniti Group (UNIT) each reported strong results and raised their full-year FFO guidance.

cell tower REITs

Office, Hotel, & Casino Earnings Recap

Office:(Final Grade: B+) While WFH headwinds will persist, the office REIT outlook has brightened in recent months - particularly for REITs focused on more business-friendly Sunbelt regions - as solid earnings results last quarter carried into Q3. Ten office REITs raised their full-year outlook led by solid results from sunbelt-focused REITs Highwoods (HIW) and Piedmont (PDM) and signs of resistance from coastal forced REITs Boston Properties (BXP) and Hudson Pacific (HPP).

office REITs 2021

Hotel: (Final Grade: C+) One step forward, one step back. With vaccines in arms and the economy rebounding, it was poised to be a memorable 2021 for hotel REITs and the broader tourism industry before the resurgence of COVID variants. Results in the third quarter confirmed that while there are signs of some business travel and group events returning, some segments of business travel may never fully return to pre-pandemic levels. We reiterate our outlook that the risks remain skewed to the downside for hotel REITs. Valuations aren't attractive enough to accept near-zero dividend yield and assume the risk of subsequent pandemic setbacks.

hotel occupancy 2021

Casino: (Final Grade: B-) The lone REIT to downwardly revise its FFO/share outlook so far, VICI Properties (VICI) actually increased its total full-year outlook FFO by 2%, but due to impact of $3.4B in equity issuance to fund its $4B acquisition of The Venetian, its full-year FFO per share growth outlook was revised down to 9.5% from its prior guidance of 12.5%. VICI commented that it expects its $17.2B acquisition of MGM Growth Properties (MGP) - which reported solid results in Q3 - to be completed in the first half of 2021. Results from Gaming and Leisure Properties (GLPI) were roughly in-line with estimates., but the sector's potential exposure to a potential environment of persistently-elevated inflation has become a concern among some investors.

casino REIT FFO 2021

Specialty REIT Sectors

Student Housing: (Final Grade: A) American Campus (ACC) - the lone student housing REIT - reported impressive Q3 results, citing strong enrollment trends at tier-one universities and limited supply growth. Driven by a 95.8% opening all occupancy and 3.3% average rental rate growth in the Fall semester, same-store NOI growth jumped 10.5% from last year. That compares with ACC's initial expectation of 93% leased with 2.5-3.0% average rental rate growth. CEO Bill Bayless commented that ACC is "experiencing the most substantial fundamental tailwinds we've seen in many years."American Campus Core FFO Growth

Prisons: (Final Grade: B) GEO Group (GEO) has rallied nearly 60% from its lows in late May as the Biden legislative agenda - including the federal prohibition of private prisons - faces an increasingly uncertain future as key defeats in the recent election was seen as a de-facto referendum on the President's agenda. GEO - which reported results that were roughly in line with expectations and held its full-year outlook stead - commented that it expects a conclusion of its strategic review to decide whether or not to remain a REIT going forward will be made "by year-end for sure." Last year, fellow prison operator CoreCivic (CXW) decided to end its run as a REIT. GEO

Billboard: (Final Grade: A-) Lamar Advertising (LAMR) and Outfront (OUT) each appear to be well on the road to recovery following a sharp downturn in Out-of-Home advertising demand during the pandemic. LAMR boosted its full-year outlook once again in Q3 and now sees AFFO growth of 25.8% this year - up another 440 bps from its prior outlook. Outfront - which owns a more public-transit-heavy billboard portfolio - reported signs of rapid improvement as well but did not provide full-year guidance.

billboard REITs

Takeaways: Rents Paid, Dividends Raised

Nearly 200 REITs have reported earnings results over the past two weeks, providing critical information on the state of the real estate industry heading into year-end. Results were generally better-than-expected with roughly 90% of equity REITs beating consensus FFO estimates while more than 75% of the REITs that provide forward guidance boosted their full-year outlook, while another dozen REITs added their names to the swelling list of 120+ dividend hikes this year - the highest quantity of REIT dividend hikes on record.

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For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Manufactured Housing, Student Housing, Single-Family Rentals, Cell Towers, Casinos, Industrial, Data Center, Malls, Healthcare, Net Lease, Shopping Centers, Hotels, Billboards, Office, Storage, Timber, Prisons, Cannabis, High-Yield ETFs & CEFs, REIT Preferreds.

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