Assuming minimal price inflation for the remainder of the year and FFO estimates accurately represent company performance, earnings multiples are expected to contract in 2005, according to SNL Financial.
REIT Sector Performance
Expected Multiples Still Above Average
|
|
Median Price FFO Multiple |
| REIT Property Focus |
2000Y |
2001Y |
2002Y |
2003Y |
2004Y |
Current* |
5-Yr. Avg. |
| Hotel |
5.7 |
6.4 |
8.5 |
14.5 |
18.3 |
12.1 |
10.7 |
| Industrial |
9.7 |
10.2 |
10.7 |
13.7 |
16.5 |
16.3 |
12.2 |
| Manufactured Homes |
10.5 |
11.3 |
11.2 |
13.1 |
NM |
15.3 |
11.5 |
| Multi-Family |
10.0 |
10.6 |
10.2 |
14.3 |
16.7 |
15.8 |
12.4 |
| Office |
8.9 |
8.9 |
8.5 |
11.3 |
14.0 |
14.1 |
10.3 |
| Regional Mall |
6.9 |
9.1 |
9.3 |
12.1 |
14.7 |
14.5 |
10.4 |
| Shopping Center |
7.3 |
10.4 |
11.1 |
13.4 |
15.7 |
13.9 |
11.6 |
| Retail: Other |
7.2 |
8.2 |
10.0 |
12.2 |
14.3 |
14.0 |
10.4 |
| Self-Storage |
9.5 |
11.4 |
12.1 |
15.4 |
19.0 |
18.0 |
13.5 |
| Diversified |
7.4 |
9.3 |
9.3 |
12.4 |
14.5 |
15.0 |
10.6 |
| Health Care |
6.0 |
9.7 |
10.8 |
13.1 |
14.5 |
13.7 |
10.8 |
| All Equity REITs |
8.3 |
9.9 |
9.8 |
12.6 |
15.4 |
14.4 |
11.7 |
* Price and FFO 2005Y estimates as of July 18, 2005
Source: SNL Financial LLC |
That would certainly be good news for the REIT industry, as the apparent tightening will be the end result of stronger operating fundamentals. Additionally, each individual property sector is poised to end the year above its five-year trailing average, according to SNL.
