Same Store NOI in REIT Reporting

Same store NOI is the net operating income of a defined group of properties that a REIT held through every period being compared. Growth in that figure shows how the same buildings performed, with acquisitions and sales kept out of the comparison. Each issuer writes its own membership rules, so the same label can cover different populations from one REIT to the next.

Who gets onto the same store roster

Membership is decided by ownership timing. A property counts as same property when it was owned for the full periods presented, and anything else is non-same property.

The reason is arithmetic. A building bought midway through the earlier period carries a partial period of income in the base and a full period in the current figure, so including it would report ownership change as operating growth. Leaving it out removes that distortion.

Acquisitions and dispositions during the comparison periods are excluded from the same property results, and properties held for sale are treated as non-same property. The roster can therefore shrink between reports even when nothing about the remaining buildings has changed.

“Properties in our portfolio are considered same property if they were owned for the full periods presented, otherwise they are considered non-same property.”

How the NOI line is built and what moves it

Property NOI is rental revenue less rental expense, measured on a consistent property population so ongoing operations can be assessed. Growth is the change in same store NOI divided by the earlier period’s same store NOI.

That single percentage mixes revenue and expense effects. In one annual comparison, higher rental revenue from leasing activity, lower non-recoverable expenses and increased other rental income lifted the figure, while lower percentage rents partly offset them.

Because expense savings drop straight to NOI, a modest cut in non-recoverable costs can move the growth rate as much as a rent increase on the same dollar amount.

Development and redevelopment: when a property enters the group

Some issuers admit newly built or reworked assets only after a stated test. Recently developed or redeveloped OM&R and NNN properties are included after substantial completion. SHOP development and redevelopment properties are included once they are stabilized for the full period in both periods presented.

Stabilization is reached at 80% sustained occupancy or 24 months after acquisition or substantial completion, whichever comes first. A building that reaches 80% quickly qualifies early, and one that lags is admitted when the 24 months run out regardless of occupancy.

The full-period requirement delays entry further. A property that stabilizes late in the current period has no stabilized base period to compare against, so it stays out until both periods are covered.

The lease-up gains of a new building therefore reach the same store figure only after the steepest part of the climb is behind it.

Exclusions that change the roster mid-stream

Properties that are sold, held for sale or classified as discontinued operations drop out of the same store set. So do properties hit by a significant disruptive event such as a flood or fire, and SHOP properties in significant disruptive redevelopment.

These carve-outs keep distorted income from contaminating the comparison. They also give management a defined moment at which a weak or disrupted asset leaves the denominator, which is why the roster count belongs next to the growth rate whenever two periods are read together.

Contributed properties and venture structures

Ownership structure can change while the buildings stay the same. Certain wholly owned properties contributed to a co-investment venture can remain in the same store portfolio.

The consolidated results and the venture results, viewed individually, would not be comparable on a same store basis because portfolio composition changes between periods. A same store pool built across both structures follows the buildings, and that is why neither statement alone reconciles to it.

Worked example: same store growth against consolidated growth with one acquisition

The figures below are hypothetical and use one roster of stabilized properties. In the earlier period the roster produces rental revenue of $16,000,000 and rental expense of $6,000,000, so same store NOI is $16,000,000 minus $6,000,000, or $10,000,000.

Base case: current revenue rises $800,000 to $16,800,000 and expense rises $400,000 to $6,400,000. NOI is $16,800,000 minus $6,400,000, or $10,400,000. Growth is $10,400,000 minus $10,000,000, or $400,000, and $400,000 divided by $10,000,000 is 4%. Revenue growth is $800,000 divided by $16,000,000, or 5%.

Alternative case: revenue rises $500,000 to $16,500,000 and expense rises $300,000 to $6,300,000. NOI is $10,200,000, growth is $200,000, and the rate is 2%.

Now add a property bought during the earlier period that contributes $600,000 of NOI in the current period and nothing in the base. It is non-same property, so the same store rates stay at 4% and 2%. Consolidated NOI becomes $10,400,000 plus $600,000, or $11,000,000, in the base case, which is 10% growth over $10,000,000. In the alternative case it is $10,200,000 plus $600,000, or $10,800,000, which is 8%.

Both cases use the same roster, the same base period and the same acquisition. The gap between consolidated and same store growth is purchased income, and the same store rate is the measure of how the existing buildings performed.

Common mistakes when reading same store NOI

Treating the label as a fixed standard is the first error. Ownership timing, development entry tests, held-for-sale treatment and venture contributions are all issuer choices, so two reported rates can describe different kinds of rosters.

Reading same store growth as portfolio growth is the second. In the example, consolidated NOI grows 10% in the base case while the same store figure grows 4%, and the difference is the acquired income.

Carrying one issuer’s stabilization test over to another misreads its disclosure. An 80% occupancy or 24 month test describes one definition, and a different threshold or a different clock changes when a lease-up property starts to lift the rate.

Attributing the whole percentage to rents ignores the expense side. In the base case revenue grows 5% while NOI grows 4%, because expense rose $400,000 against $800,000 of added revenue.

Ignoring roster changes between reports also distorts the trend. A property leaving as held for sale or disrupted changes the denominator, so a rate can move with no change in how the remaining buildings operate.

Questions for reading a same store NOI figure

Which properties are in the pool, and how many? The count anchors the rate to a specific roster.

Is the full-period ownership test applied the same way in both periods? Partial-period ownership is what the test exists to screen out.

How do development and redevelopment assets enter the group? A stated occupancy or elapsed-time test fixes when lease-up begins to show in the rate.

Which sold, held-for-sale or disrupted properties were removed this period? Their exit changes the base of the comparison.

How much of the change came from revenue and how much from expense? NOI is rental revenue less rental expense, so the percentage alone does not say which side moved.

Did any wholly owned properties move into a venture during the periods? Contributed properties can stay in the pool even though consolidated and venture results each look different.

What does the consolidated NOI change look like beside the same store rate? The gap between them reflects acquired and sold income.