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A little clarity for your next decision.
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Investor WorkspaceA little clarity for your next decision.
By Jerry Baker
Same-store net operating income, or NOI, compares income from a defined group of properties across two periods. It helps you see how existing buildings performed without letting new purchases dominate the result, but the property group and accounting rules vary by company. Read the definition before you use the growth rate to compare REITs.
A REIT can grow by buying more buildings or by earning more from the buildings it already owns. Those are different achievements. Same-store reporting tries to isolate the second one, subject to the issuer’s rules about which properties belong in the comparison.
NOI generally starts with property revenue and subtracts property operating expenses. Think of rent, property taxes, utilities, repairs, and other costs at the building level. The exact inclusions matter. It is not automatically the REIT’s net income, cash from operations, or money available for dividends.
For example, Prologis defines its same-store measures using rental revenue less rental expense for the included properties. It reports both cash and net-effective versions, with adjustments and ownership rules described in its release. That is a specific issuer’s method, not a universal definition for every real estate company. [1]
I find this measure useful because it asks a focused question: Are the properties in this group doing better? I still need other measures to answer whether the entire investment is doing better for shareholders.
The basic growth calculation is the change in same-store NOI divided by the prior period’s same-store NOI. Use matching periods and the same property group. All worked examples below are hypothetical and ignore items not stated.
| Same property group | Prior year | Current year |
|---|---|---|
| Revenue | $90 million | $95 million |
| Operating expenses | $30 million | $33 million |
| NOI | $60 million | $62 million |
The NOI increase is $2 million. Divide that by $60 million, and growth is about 3.33%. Revenue grew about 5.56%, while expenses grew 10%. A headline about rising rents would leave out the pressure from costs.
Now suppose newly purchased buildings add another $20 million of NOI. Total property NOI rises from $60 million to $82 million, or about 36.67%. Same-store growth remains 3.33% for the original group. Neither figure replaces the other. They answer different questions about how the business grew.
Find the footnote that says which buildings count. Do not assume “same-store” means every building the REIT owned for the full calendar year. The issuer may set dates for stabilization, remove assets held for sale, or handle redevelopment in a separate group.
Prologis’s second-quarter 2026 comparison used an operating-property population anchored to January 1, 2025 and ownership through the matching quarters. It excluded specified held-for-sale assets, certain development properties, and third-party purchases or sales during the periods. Its method also held currency rates constant. Those details define the comparison. [1]
For any issuer, I would record four things beside the reported percentage: the pool’s start date, included property count, reasons for exclusions, and the portion of the broader portfolio it represents. If that information is unclear, the percentage needs more explanation before I rely on it.
A stable pool within one report does not mean the company uses exactly that pool forever. Next year’s pool may include buildings that have since stabilized and omit buildings that were sold.
Imagine a portfolio with $60 million of prior-year NOI. One building produced $10 million, and all other buildings produced $50 million. This year, that building produces $5 million, while the remaining group produces $52 million.
If the troubled building is properly excluded under the company’s stated reporting policy, the included group shows 4% growth. Yet NOI from the entire original portfolio fell from $60 million to $57 million, a 5% decline.
This example does not show that exclusions are improper. Redevelopment, sales, and major disruptions can make a separate comparison useful. It shows why I also want the excluded-property results. A measure can be calculated correctly and still give an incomplete picture of the business.
Ask whether an exclusion is temporary, whether the property will return to the pool, and what spending is needed before it does. The cost of fixing a building does not vanish because the building sits outside a same-store table.
AvalonBay’s reported second-quarter 2026 same-store residential results provide a dated example. Revenue grew 1.6%, operating expenses grew 2.9%, and NOI grew 1.0% compared with the prior-year quarter. These are reported historical results, not a forecast for apartments generally. [2]
The practical lesson is to read all three lines. Rising revenue may reflect higher rent, stronger occupancy, fewer concessions, or other income. Expenses may move because of taxes, insurance, payroll, maintenance, or the timing of work.
In a hypothetical comparison, two portfolios each gain $5 million in revenue. The first also adds $1 million in expenses, leaving $4 million more NOI. The second adds $4 million in expenses, leaving only $1 million more NOI. Similar rent headlines can lead to very different property results.
I would also ask whether lower costs are repeatable. A delayed repair can help one quarter while making a later quarter worse. A lasting reduction in energy use has a different economic meaning.
Consider 100 identical apartments. At 95% occupancy and $2,000 monthly rent, annual rent would be $2.28 million. At 97% occupancy and $2,060 rent, it would be $2,397,840, about 5.17% more.
That simple example assumes all occupied units pay the stated rent for the full year. Actual results require more detail. Free rent, unpaid balances, move-in timing, and fees can change revenue. Repair and operating costs then determine how much revenue reaches NOI.
It also shows why rent growth alone is not enough. A higher asking rent does little for an empty unit. Strong occupancy does not settle the question if the owner had to give away several months of rent to achieve it.
When reviewing a report, I would separate physical occupancy from the money actually earned and collected. I would ask whether the quoted rent applies to newly signed leases, renewals, the full occupied portfolio, or only a small sample.
Some rental revenue is recognized over time rather than when the tenant pays. A cash-based measure may adjust for straight-line rent or other lease accounting items. Read the issuer’s reconciliation to learn what changed.
Prologis reported second-quarter 2026 growth of 6.4% for its share of same-store net-effective NOI and 8.5% for its cash version. Its reconciliation removes specified noncash lease items. Those different percentages describe different measures for a defined period; they are not two competing claims about investor returns. [1]
AvalonBay separately reconciles residential revenue to revenue with concessions on a cash basis. The table replaces the effect of concessions recognized over time with concessions actually granted in the period. It helps readers see a timing difference that a single revenue line might hide. [2]
I would not automatically choose whichever version grew faster. I want to understand the reason for the difference and whether today’s cash pattern is likely to reverse as leases mature.
Similar names can hide different calculations. W. P. Carey’s second-quarter 2026 supplement reported 2.6% contractual same-store growth using annualized base rent. Its broader same-store rental-income measure grew 0.2%. These are rent measures, not identical NOI measures. [3]
The contractual measure excluded specified renewals, extensions, modifications, and vacated leases. The comprehensive measure included certain lease changes and used a different period-based rental-income comparison. Both applied stated constant-currency methods. The definitions explain why the figures should not be treated as interchangeable. [3]
For a new report, copy the exact label before entering a number into your comparison sheet. Is it rent growth, leasing spread, revenue growth, NOI growth, or cash NOI growth? Is it annualized rent at a date or actual income earned during a quarter?
If those labels differ, pause before ranking companies. A spreadsheet can line up percentages neatly while comparing entirely different things.
A company may report an entire property’s results even though it owns only part of the property through a venture. Another table may show just the company’s share. Check which one you are using.
Suppose a venture produces $10 million of NOI and the REIT owns 40%. Its proportionate share is $4 million under that simple assumption. Comparing $10 million in one period with $4 million in another would create a false decline if only the reporting scope changed.
Currency can also affect the result. Imagine local income remains €10 million. At $1.10 per euro, it translates to $11 million; at $1.00, it translates to $10 million. Local operations were unchanged, but reported dollars fell about 9.09%.
A constant-currency comparison helps isolate the local operating change. It does not erase currency risk for the investor. I would keep both views: how the properties performed in their markets and what that performance meant in the currency used by the company and investor.
Do not average property growth rates unless the weighting method supports it. Assume one group began with $90 million of NOI and grew 2%. Another began with $10 million and grew 20%. Their current NOI is $91.8 million plus $12 million, or $103.8 million.
The combined growth rate is 3.8%, not the simple average of 11%. The large group has much more influence on the dollar result.
The starting amount also matters. A small property recovering from $1 million to $2 million shows 100% growth. A much larger portfolio moving from $100 million to $105 million shows 5% growth but adds five times as many dollars.
Neither percentage tells you the purchase price, risk, or capital needed to produce that gain. When a growth rate looks striking, ask what happened to the starting period. A return from a very weak year can look dramatic without making the current result especially strong.
A quarter-over-quarter change answers a different question from the same quarter a year earlier. Seasonal utilities, property taxes, maintenance, and hotel demand can make short comparisons misleading. A year-to-date figure may also smooth a sharp recent change.
I would write the dates in full on a review sheet. “Three months ended June 30” is more useful than “latest growth.” Then I would check whether the prior-period number was restated to match the current pool.
Keep actual results apart from guidance. A company can report 1% growth so far while forecasting 3% for a later period. The forecast may depend on leases starting, expenses falling, or vacancies filling. Those are assumptions to test, not completed results.
For a multi-year chart, note each change in the pool or definition. A smooth line can suggest a fixed group of properties even when each annual comparison uses a new group.
The SEC’s financial-statement guide distinguishes operating, investing, and financing cash flows. Those categories matter because a property operating measure does not describe every use of company cash. Read the cash-flow statement alongside the supplemental property data. [4]
Suppose a hypothetical company has $60 million of NOI, $20 million of debt payments, $5 million of corporate costs, and $10 million of capital spending. That leaves $25 million before other unstated items.
The next year, NOI grows 5% to $63 million. But debt payments rise to $25 million and capital spending rises to $13 million, while corporate costs stay at $5 million. The simplified remainder falls to $20 million.
The properties earned more, yet less cash remained under these assumptions. This is why I ask about debt maturities, building needs, and other claims on cash before drawing a conclusion about distributions. NOI is one step in the analysis, not the final check written to investors.
In direct capitalization, an indicated property value equals the selected annual income divided by an appropriate capitalization rate. The California Board of Equalization explains this valuation method. Choosing suitable income and a suitable rate requires judgment. [5]
Using a simplified example, $60 million of annual NOI at a 6% cap rate implies $1 billion of value. If NOI rises to $63 million but the relevant cap rate rises to 7%, the indicated value becomes $900 million.
Income grew 5%, while that valuation fell 10%. This is an illustration of sensitivity, not an appraisal or a forecast. It excludes transaction costs and assumes the income measures and rates are comparable.
A REIT’s share price adds other influences, including company debt, fees, market expectations, and the price investors will pay for its shares. Positive same-store NOI growth cannot promise a positive share-price return.
A property may receive a payment that relates to an earlier period. Examples to ask about include a tenant settling an old balance, an insurance recovery, or a property-tax refund. Do not assume the reported measure treats each item the same way. Find the issuer’s policy and the amount involved.
Suppose current NOI is $12 million versus $10 million a year earlier. That is 20% growth. If the current amount includes a $1.5 million tax refund that will not recur, removing only that item would leave $10.5 million, or 5% growth. That second figure is an investor’s hypothetical adjustment, not a substitute for the reported result.
I would keep both numbers and explain the difference. A real refund is still valuable. It simply has a different meaning from rent that tenants are expected to pay every year. Before adjusting, also ask whether the earlier period contained a related charge. Removing the benefit while ignoring that charge could distort the comparison in the other direction.
A same-store measure intentionally leaves out parts of a growing business. New purchases and developments still deserve their own review. How much capital did the REIT invest? When did rent begin? How much work remains, and what income did the purchase plan assume?
Imagine two companies with the same 3% same-store growth. One spent $200 million on a completed, leased building. The other committed $200 million to a project that has not opened. The shared growth percentage says little about those new investments or their risk.
I would separate completed acquisitions, buildings still leasing up, and projects still under construction. Then I would compare actual progress with the original plan. A strong old-property result does not prove the new capital was well spent. A weak same-store quarter also does not, by itself, prove a new project was a mistake.
The useful question is how the parts fit together. Existing properties may fund the business today while new projects require cash for several years. That timing affects the company’s borrowing and ability to absorb delays.
My review sheet would have one row for each issuer and reporting period. I would include the exact metric name, cash or accounting basis, property count, ownership basis, prior NOI, current NOI, and growth rate. Beside those fields, I would summarize exclusions and notable costs.
Then I would add a short plain-English explanation: “Revenue grew, but insurance and payroll absorbed much of the increase,” or “Cash rent improved as an earlier free-rent period ended.” A sentence like that is often more useful than another decimal place.
Finally, I would record what is still missing. Perhaps the company has not explained a large exclusion, or a lease starts after the reported period. Unanswered questions should remain visible rather than becoming optimistic assumptions in a spreadsheet.
SEC guidance warns that inconsistent adjustments, misleading labels, or certain exclusions can make a non-GAAP presentation misleading. Clear disclosure and consistent comparisons deserve attention, not just the size of the result. [6]
Keep the report date with your notes. Later sales, lease changes, or revisions can make an old comparison less useful. If you revisit the investment next quarter, update both the numbers and the definition instead of replacing only the headline percentage.
It means a defined group of properties used for a period-to-period comparison. Each company sets and discloses its criteria. Read the dates, stabilization rules, exclusions, and ownership treatment rather than assuming the group includes every property the company owns.
It is generally a supplemental non-GAAP property measure. Companies may calculate it differently. Review the issuer’s definition and reconciliation, then compare it with the financial statements. A familiar label does not establish a uniform calculation.
No. It describes a change in a property income measure. Your return depends on distributions, the value of your investment, fees, taxes, and other factors. Company borrowing and capital needs also affect what property income means for shareholders.
Neither version answers every question. The cash version can clarify payment timing; an accounting-based version can spread certain lease effects over time. Review both when available, understand their adjustments, and examine future lease obligations before choosing a conclusion.
The included group may improve while other assets are sold, lose tenants, or leave service for redevelopment. A smaller overall portfolio can produce less total income even when retained properties perform well. Read the changes outside the same-store pool.
Only after checking whether the measures are reasonably comparable. Match periods, property types, cash or accounting basis, ownership shares, and pool rules. Even a well-matched growth comparison leaves out purchase price, debt, capital spending, and investment risk.
Ask whether the prior period was unusually weak, whether the pool changed, and whether a one-time receipt helped. Check the dollar gain, expenses, and capital needed to produce it. Then ask what evidence supports management’s expectation that the improvement can continue.
Educational information, not an offer or a personal tax, legal, or investment recommendation. Examples are hypothetical and omit stated adjustments. Tax treatment depends on your facts and current law. Review your transaction with your CPA, attorney, and qualified intermediary. Real estate investments can lose value and may be illiquid.
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