REITs see strong first-quarter NOI growth

Publish Date: April 24, 2014

Topics: glimcher, preit, ramco-gershenson, reit, simon property group


Several U.S. retail REITs reported net operating income growth attributable to strong leasing spreads and occupancy gains. Simon Property Group, the largest U.S. retail REIT, posted $865.3 million in first-quarter funds from operations, up from $741.9 million a year ago. The firm’s same-center NOI grew by 3.7 percent. “Overall business conditions are positive,” said CEO David Simon on an earnings call. “Demand for space in our portfolio remains strong. Leasing activity is helping. We had occupancy growth of 80 basis points, compared to the first quarter of 2013. Re-leasing spreads were $9.90 per square foot.” Based on this momentum, the firm is upgrading the high end of its FFO outlook for this year to $9.70 per share, 10 cents per share more than it was projecting in the fourth quarter of 2013. Simon Property is anticipating annual same-store NOI growth of at least 4 percent, Simon said.

Columbus, Ohio–based mall REIT Glimcher Realty Trust reports a same-center net operating income increase of 2.6 percent for the quarter, thanks largely to lease renewal spreads of 21 percent. Glimcher’s first-quarter funds from operations grew to $23.1 million from $14.3 million a year ago, while its tenant sales increased by an average of 4 percent year on year, to $471 per square foot.

Meanwhile, Farmington Hills, Mich.–based Ramco-Gershenson Properties Trust, which focuses on grocery-anchored centers, announced first-quarter same-center NOI growth of 3.3 percent. The firm’s FFO rose to $22.9 million, up from $18.8 million. Leasing spreads for new tenants were at 5.7 percent for the quarter, and spreads for lease renewals were at 5.1 percent.

PREIT was the only operator to report a drop in same-center NOI for the quarter so far, attributable to the cold weather’s impact on its malls, which are located primarily on the East Coast. PREIT’s FFO, meantime, grew by 8.1 percent to $28 million, but its same-center NOI fell by some $3.8 million, or 5.7 percent, resulting largely from snow-removal and energy expenses that were $4.5 million more than a year ago, according to CEO Joseph Coradino. The unusually cold weather also caused PREIT’s sales per square foot to fall by 1 percent to $377, from $381 per square foot a year ago. “In spite of weather-related short-term setbacks, operating momentum has been strong,” Coradino said in a press release, “including growth in revenue and occupancy, along with the strongest re-leasing spreads we’ve generated since the recession.” Indeed, PREIT’s re-leasing spreads for tenants taking up less than 10,000 square feet jumped by some 7.4 percent, helping push average gross rent for the quarter up 4.8 percent year on year. 

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