New/Market Rent Per Sq. Ft.
New rent per square foot is the rent per square foot at the time of the new lease.
Guide to Retail REITs Industry KPIs
This guide highlights the key performance indicators for the Retail REITs industry and where investors should look to find an investment edge. While this guide is not a fully integrated retail REITs industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key performance indicators in the retail REITs industry. This guide will aid market participants in identifying industry trends and the future performance of retail REITs companies, by region and service type.
Industry Business Model
Revenue
Retail REITs generate revenue by leasing retail properties to tenants, who pay rent either monthly, quarterly, or annually to the REIT company on a square per-foot basis. Revenue generated by retail REITs can be classified into several categories depending on the type of contract agreement between the retail tenant and the landlord (REITs). These categories include:
- Minimum rents – Minimum rent also referred to as basic rent of a commercial lease is the minimum initial rent paid by the retail tenants. This is due to the REIT every month, based on the square per foot of the leased space. Minimum rents are sometimes accretionary in nature, that is, increasing each year throughout the term of the lease, depending on the lease period and the agreed terms and conditions.
- Tenant reimbursements – Tenant reimbursements, sometimes referred to as tenant recoveries, are expenses paid back to a REIT by its retail tenants. These include property maintenance and repair costs, property insurance, property tax, and other operational expenses, among others. In the case of net lease, the tenant bears all of these expenses and pays a net rent to the landlord.
- Percentage rents – Percentage rent is a type of rent payment structure in commercial real estate where the retail tenant’s rent is calculated as a percentage of sales rather than a fixed monthly or annual amount, in addition to minimum rent.
Expenses
Total rental expenses: REITs incur expenses to operate the portfolio of properties they hold. These expenses are is classified into four main categories:
- Property operating expenses – Property operating expenses are ongoing costs associated with operating a rental property. These are the costs that affect the daily operations of a REIT’s property and are crucial to maintaining the revenue stream of a retail REIT.
- Real estate taxes – Real estate taxes are taxes paid on the property owned by a REIT company.
- Property maintenance and repair expenses – These are expenses related to repairs and maintenance of the real estate property, management fees, utilities, and insurance costs.
- Capital expenditures (Capex) – REIT is a capital-intensive industry that requires a substantial amount of capex for the development and redevelopment of a property. This makes capex a major expense for a REIT company.
Other Key Items and Ratios
Investors in retail REITs evaluate the profitability of REIT companies by looking at net operating income (NOI), funds from operations (FFO), and adjusted funds from operations (AFFO).
- Net operating income (NOI) – NOI is a measure of the profitability of a REIT company, after deducting all expenses associated with operating and maintaining the properties that a REIT company manages.
- Funds from operations (FFO) – FFO is useful to investors in measuring the operating and financial performance of a REIT company. It is calculated as net income applicable to common stockholders excluding non-cash adjustments.
- FFO payout ratio – FFO payout ratio helps investors understand dividend payments as a percentage of earnings. It is calculated by dividing total dividends paid with funds from operations (FFO).
- Adjusted funds from operations (AFFO) – AFFO is a financial measure used to estimate the value of a REIT. It is calculated as FFO minus capital expenditures and maintenance capex.
- AFFO payout ratio – AFFO payout ratio helps investors understand dividend payments as a percentage of earnings. It is calculated as total dividends paid during a given period, divided by adjusted funds from operations (AFFO) in the same period.
- Finally, investors also monitor debt / assets and debt / equity ratios to analyze investment efficiency and leverage.
Industry Schematic Diagram
CLICK DIAGRAMS TO EXPAND
Key performance indicators (KPIs) are the most important business metrics for a particular industry. When understanding market expectations for Retail REITs, whether at a company or industry level, some Retail REITs KPIs to consider are:
Visible Alpha’s Standardized Industry Metrics
To understand market expectations for the retail REITs industry, a key information source is sell-side analyst estimate and consensus forecast data. The buy-side, sell-side, and public companies leverage this type of data to conduct competitive analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.
Visible Alpha Insights includes analyst data, company data, and industry data at a level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.
Data as of January 2023
55
Global Tickers
585
Current Analyst Excel Models
93
Proprietary line items in our standardized operating metrics data
62
Contributing Brokers
230
Proprietary line items in our standardized financials data
323
Total standardized line items
Visible Alpha offers 9 Retail REITs-related comp tables, comparing forecasts for key financial and operating metrics, to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for global retail REITs, Americas or Europe. Every pre-built, customizable comp table is based on region, sub-industry, or key operating metrics.
North America
- Simon Property Group (SPG_US)
- REGENCY CENTERS CORP (REG_US)
- KITE REALTY GROUP TRUST (KRG_US)
- KIMCO REALTY CORPORATION (KIM_US)
- RAMCO-GERSHENSON PROPERTIES TRUST (RPT_US)
EMEA
- Deutsche Euroshop AG (DEQGN_DE)
- Carmila (CARM_FP)
- Mercialys SA (MERY_FR)
- Unibail-Rodamco-Westfield SE (URW_FR)
- Klepierre (LOIM_FR)
- HAMMERSON PLC (HMSO_UK)
- Capital & Regional PLC (CAL_UK)
- LAND SECURITIES GROUP PLC (LAND_UK)
LATIN AMERICA
- Iguatemi Empresa de Shopping Centers SA (IGTA3_BR)
- Aliansce Shopping Centers (XAHPF_BR)
- BR Malls Participacoes SA (BRML3_BR)
ASIA
- IFortune REIT (0778_HK)
- The Link REIT (0823_HK)
- Frasers Centrepoint Trust (FCRT_SG)
Industry KPI Terms & Definitions
Visible Alpha offers an innovative, integrated experience through real-time, granular consensus estimates and historical data created directly from the world’s leading equity analysts. Using a subset of the below KPIs, this data can help investors hone in on the key drivers of companies to uncover investment opportunities. Learn More >
Portfolio Occupancy Rate
Portfolio occupancy rate measures the occupancy rate or the percentage area of a REIT’s property that has been leased. It is calculated as leased space divided by total leasable area. Portfolio occupancy rate is a measure of success that a REIT has had in attracting tenants and leasing the space it owns. The higher the occupancy rate for a REIT over time (compared to its peers), the better.
Same-store Net Operating Income (NIO) Growth (%)
Same-store net operating income (NIO) growth is a key measure of profitability for a retail REIT. It is growth that excludes certain non-cash and non-comparable items. Same-store NOI is calculated as same-store revenues minus same-store operating expenses, including property taxes.
Acquisition Rate
Acquisition rate refers to the yield that is generated from an acquired property.
Acquisition Volume
Acquisition volume refers to the additions to a retail REIT’s portfolio of investment properties. This may take the form of transactions in real estate.
Development Rate
Development rate refers to yield that is generated from a property in development.
Development Volume
Development volume is a measure of a new construction or previously agreed upon re-developments.
Disposition Rate
Disposition rate refers to yield that is generated from a disposed property.
Disposition Volume
Disposition volume refers to the sale of real estate holdings by retail REITs.
Capitalization Rate (%)
Capitalization rate, or cap rate, is the initial yield on a real estate investment. Cap rate is computed by dividing the cash flow in year 1 by either the acquisition/disposition price or the total expected development cost.
Total Square Feet (K)
Total square feet (K) is the total amount of floor space available for rent to retail tenants.
Square Feet of Expiring Lease (K)
Square feet to expiring lease (K) is the number of square feet of lease which is expiring in a period.
Expiring Rent Per Square Feet
Expiring rent per square foot is the rent per square foot at the time of expiration of the lease.
New Rent Per Square Feet
New rent per square foot is the rent per square foot at the time of the new lease.
Total Potential Roll-up/Down Per Square Feet
Total potential roll-up/down per square feet is the difference between rent per square foot at the time of a new lease vs an expiring lease.
Average Lease Term (Years)
Average lease term (years) measures the average period during which all leases in a retail REIT’s property or portfolio will expire.
Average Cost of Debt (%)
Average cost of debt (%) is a measure of the average interest rate paid to fund a retail business. It is calculated as interest expense paid divided by average debt (secured and unsecured loans and revolving credit facilities)
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Guide to Retail REITs Industry KPIs for Investment Professionals
This guide highlights the key performance indicators for the retail REITs industry and where investors should look to find an investment edge, including:
- Retail REITs Industry Business Model & Diagram
- Key Retail REITs Metrics PLUS Visible Alpha’s Standardized Industry Metrics
- Available Comp Tables
- Industry KPI Terms & Definitions
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