Real estate investment trusts’ operations remained solid with year-over-year increases in funds from operations and net operating income, according to the National Association of Real Estate Investment Trust. Data from Nareit T-Tracker from the fourth quarter of 2022 show, however, that healthcare REITs are lagging behind other sectors in pandemic recovery.
Despite economic headwinds, the data show that equity REITs displayed operational strength. Specifically, the data show that FFO was $18.5 billion, or 10.1% higher than a year ago. NOI and same-store NOI experienced 6.8% and 6.5% year-over-year gains, respectively. According to Nareit, that underscores that REITs are keeping up with inflation.
On a quarterly basis, FFO was down 6.2%, but that decrease was mainly driven by isolated issues related to non-US operations and currency losses, according to Nareit, and are not reflective of the US real estate market. Excluding the isolated issues, quarterly FFO growth was slightly positive.
“REITs continue to be well prepared to navigate this period of economic uncertainty and higher interest rates,” Nareit Executive Vice President of Research and Investor Outreach John Worth said. “REITs have maintained strong balance sheets, delivered solid operational performance, and notably paid out $61.9 billion in total dividends during 2022 — which is a 13.8% increase over 2021.”
According to the experts at Nareit, to remain well-prepared for continued higher interest rates, REITs should maintain long-term, well-structured debt along with low levels of leverage. Data show that leverage ratios remained near historical lows with debt-to-market assets at 33.7%; weighted average term to maturity of REIT debt was nearly seven years, or 82.4 months; and weighted average interest rate on total debt was 3.7%.
