The REIT sector has been in a funk of late. A combination of high interest rates, coupled with surging inflation, has dampened demand for this asset class. These headwinds threaten to lower REITs’ distribution per unit (DPU) as operating and finance expenses surge. Despite these headwinds, REITs continue to be a choice pick for income-seeking investors as they dole out dependable distributions. REIT managers can also employ a variety of methods to mitigate the effects of high inflation and interest rates. We feature three of these methods and provide some examples of REITs that have employed them.

Acquisitions

Acquisitions are the primary method for REITs to build and grow their portfolios so that they can pay out a higher DPU. The REIT manager will source for suitable acquisitions where the net property income (NPI) yield of the asset exceeds the REIT’s cost of borrowing....