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How 3 Key Industrial REITs Managed Expenses in 2Q17

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Aug. 25 2017, Published 11:19 a.m. ET

2Q17 income expense scenario

Industrial REITs (real estate investment trusts) fund their development and redevelopment properties through debt, and such REITs have to maintain their properties in good condition, which requires that they carry repair and maintenance expenses in order to attract new tenants.

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Prologis in 2Q17

Prologis (PLD) incurred same-store rental expenses of $241.9 million in 2Q17, which was 2.4% higher than in 2Q16. Its general and administrative expenses also increased to $60.1 million from $56.9 million, but its operating income rose to $275.3 million, compared with $142.3 million a year ago. The company’s SSNOI (same-store net operating income) gained 4.6% and reached $421.7 million in 2Q17.

PLD expects to incur general and administrative expenses of $215 million–$225 million in fiscal 2017, compared with $222 to $228 million one year previously. Net income is expected to be in the range of $65 million–$75 million. PLD expects its NOI to grow in the range of ~4.5%–5.3% for fiscal 2017.

Duke Realty

Duke Realty (DRE) witnessed a 3.6% gain in its NOI to $$108.2 million in 2Q17 backed by higher rent growth. DRE reported total expenditures of $130.8 million, compared with $125.3 million in 2Q16. Higher expenses were offset by rent growth, while general contractor and other services expenses came in at $22.4 million, compared with $22.2 million in 2Q16.

DCT Investment Trust

DCT Investment Trust (DCT) reported NOI of $79.5 million in 2Q17, or 11% higher than its $71.6 million in 2Q16. During 2Q17, SSNOI gained 12.4% on a cash basis, and its annual SSNOI rose 9.3% on a cash basis.

Notably, the Vanguard ETF (VNQ) has exposure to 99% exposure to REITs, and the above three REITs and Simon Property Group (SPG) together make up ~12% of the fund.

Now let’s look at these REITs’ balance sheets.

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