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  • Alex Pettee, CFA

REITs: This Time Was Different

  • While the coronavirus crisis isn't yet over, the REIT sector appears likely to avoid the type of long-term lingering pain that was felt by the sector during the Financial Crisis.

  • REITs plunged 70% during the Great Financial Crisis and took nearly eight years to return to prior highs. Back in March, pundits were forecasting a similar "lost decade" for REITs.

  • Most REITs had been "preparing for winter" for the last decade. Some aspects of this crisis were more acute than the GFC, but strong balance sheets and access to capital prevented disaster.

  • As anticipated, REITs reported significant declines in FFO, dividends, and NOI in the second quarter as REITs struggled to collect rent from "non-essential" tenants, metrics that should rebound in Q3.

  • Second-quarter fundamental metrics underscore the central theme that we've discussed extensively throughout the coronavirus pandemic: it all comes down to rent collection, which has improved sequentially every month since April.

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