Earnings of all U.S. equity real estate investment trusts fell 21.7% to $11.6 billion during the second quarter, according to the Nareit Total REIT Industry Tracker Series report. Earnings, represented as funds from operations, were 29.3% lower than the second quarter of 2019.
Healthcare REITs in particular experienced a slightly lower decline than overall equity REITs, falling 16.7%. Other hard-hit REIT sectors included lodging/resort, for which earnings fell 690% and retail, which fell 25%.
Despite these downturns, second quarter dividend payouts in the sector remained relatively unchanged, according to the Nareit report. Healthcare REITs, which had a significant decline in FFO, reported only a 2.5% drop in dividend payments compared to the first quarter. Dividend payments were 4.1% higher in the sector than a year earlier, however.
The report also showed that, overall, REITs maintained strong balance sheets despite sharp declines in earnings. The debt-to-book-asset ratio stood at 50.8%, little changed from the prior quarter and significantly lower than 58.3% in the financial crisis year of 2008. The weighted average maturity of REIT debt was 83.4 months, or nearly seven years, up from 82.3 months in the previous quarter and up from less than 60 months, or five years, in 2008.
“COVID-19 continues to impact every aspect of our economy, and while REITs are no exception, they are well-capitalized and overall the industry has a strong financial foundation,” said Steven A. Wechsler, Nareit’s president and CEO. “REITs have been strengthening their balance sheets for the past decade, putting them in a solid position to weather the ongoing challenges of this pandemic.”
