Industrial Realty Trusts Update Non-GAAP Property Metrics:
On April 1, 2025, First Industrial Realty Trust, Inc. (FR) along with EastGroup Properties, Inc., Prologis, Inc., and STAG Industrial, Inc. (collectively, the “Industrial REIT Group”), announced an update to their standardized methodology for calculating key non-GAAP property metrics. This move aims to enhance comparability across the industrial real estate investment trusts (REIT) sector.
Background:
The Industrial REIT Group’s 2018 harmonization initiative served as the foundation for this latest announcement. The group reaffirmed its commitment to utilizing consistent methods for determining property stabilization, occupancy, rent change, and customer retention.
Property Stabilization:
Property stabilization is defined as the period when a property’s income and expenses have reached a steady state. The Industrial REIT Group will continue to measure property stabilization based on achieved rental income and occupancy for a 12-month period.
Occupancy:
Occupancy will be calculated as the total rentable square footage occupied by tenants divided by the total rentable square footage in the property. This calculation will be performed on a rolling 12-month basis.
Rent Change:
Rent change will be determined by comparing the rental income generated during the current period to the previous period. The Industrial REIT Group will continue to exclude the impact of lease termination fees, tenant improvement allowances, and other one-time costs from this calculation.
Customer Retention:
Customer retention will be measured as the percentage of rental income from tenants that have signed renewals or extensions of their leases. This calculation will be based on a 12-month rolling basis.
Impact on Individual Investors:
As an individual investor, this update to the Industrial REIT Group’s methodology for calculating non-GAAP property metrics may influence your decision-making process when evaluating these companies’ financial performance. By providing more consistent and comparable data, you’ll be better equipped to assess the health and growth potential of each REIT.
- Enhanced comparability across the sector
- Improved financial analysis
- More informed investment decisions
Impact on the World:
The update to the Industrial REIT Group’s non-GAAP property metrics calculation methodology has far-reaching implications. By increasing transparency and comparability, this move can:
- Encourage greater investor confidence in the sector
- Encourage more accurate valuations of industrial REITs
- Lead to increased institutional investment in the sector
Conclusion:
The Industrial REIT Group’s decision to update its non-GAAP property metrics calculation methodology is a significant step towards enhancing transparency and comparability within the sector. By providing more consistent and comparable data, individual investors and institutions will be better equipped to assess the financial performance and growth potential of these companies. As a result, investor confidence in the sector is likely to increase, leading to more accurate valuations and potentially increased institutional investment.
This update is expected to have a positive impact on both individual investors and the industrial real estate market as a whole, contributing to a more informed and efficient investment environment.
