CTRE - REIT Earnings Halftime Report

2024-02-16 09:00:00 ET

Summary

• We're now through the halfway point of another consequential real estate earnings season, with 68 equity and mortgage REITs representing 50% of the total market capitalization reporting results.
• Beneath the renewed interest rate headwinds that have pressured the sector in recent weeks, results have been marginally better than expected- and certainly stronger than negative price action would suggest.
• Of the 51 equity REITs that provide full-year Funds From Operations ("FFO") guidance, 34 REITs (69%) beat the midpoint of their forecast, 12 (19%) matched, while just 4 missed estimates.
• Focusing exclusively on property-level fundamentals, the clear upside standouts this quarter have been industrial, senior housing, and retail REITs. We've seen mixed results from residential REITs showing a sharp cooling of rent growth in late 2023 - particularly on the multifamily side - but also a modest reacceleration into early 2024.
• Results from office REITs have been surprisingly decent relative to the dire narrative, but an encouraging rebound in leasing activity might not be enough to change the trajectory after a dismal year of double-digit FFO declines and lingering interest rate headwinds.

Real Estate Earnings Halftime Report

We're at the halfway point of another consequential real estate earnings season, with 68 of the roughly 150 equity and mortgage REITs representing 50% of the total market capitalization now having reported results. Beneath the renewed interest rate headwinds that have pressured the sector in recent weeks, REIT earnings results have been marginally better than expected - and certainly stronger than the negative price action and downbeat mainstream narrative would suggest. Of the 51 equity REITs that provide full-year Funds From Operations ("FFO") guidance, 34 REITs (69%) beat the midpoint of their forecast, 12 (19%) matched their forecast, while just 4 (12%) missed their prior guidance. Results were stronger at the property level, with more than 75% of REITs that provide same-store Net Operating Income ("NOI") guidance exceeding their prior forecast. The 69% FFO "beat rate" is running ahead of the historical REIT sector average in Q4 of roughly 65%, and quite a bit ahead of the 56% at the halfway point of earnings season last year....

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