A torrent of third-quarter earnings reports across a broad range of industries is making headlines this week. And despite the huge decline in economic activity during mid- and late-September, many real estate firms have turned in record financial results.

Of course, travel-related real estate firms stand out as a major exception. Many hotel companies are in deep financial turmoil following the Sept. 11th terrorist attacks.

Yet a broad range of real estate companies in other sectors are holding their own. And most say they will focus narrowly on their core competencies to get through challenging economic times in the coming months.

For example, Manufactured Home Communities, Inc. (NYSE: MHC) saw funds from operations for the third quarter (FFO) rise to $16.4 million (61 cents per share). This is a 7 percent increase over the company's $15.4 million (57 cents) in FFO during the same period in 2000.

Manufactured Home Communities' management team says it is confident that 2002 will be a good year, with FFO growth running between 5 percent and 9 percent. The company is raising rents at about 60 percent of its properties by an average of 5 percent.

"We continue to have confidence in the performance of our core portfolio," said Howard Walker chief executive officer for Manufactured Home Communities. "However, recent events have increased the potential for volatility in our sales and marketing operation. We are monitoring the ability of our potential customers to sell their existing homes, the performance of the financial markets and local economic conditions for their impact on our customers' confidence levels."

On the real estate investment trust front, Correctional Properties Trust (NYSE: CPV) saw its third-quarter FFO rise to $4.1 million (57 cents), compared to $2.3 million (32 cents) at this time last year. Investors will benefit from an increase in the quarterly dividend as well.

Over in the retail sector, Agree Realty Corporation (NYSE: ADC) realized an 8.7 percent increase in third-quarter FFO. On the year, that number is 6.5 percent, meaning the third quarter was even strong than the company's previous two periods.

Office and industrial property owner Liberty Property Trust (NYSE: LRY) also reaped significant 7.5 percent increases in the third quarter. The company's FFO increased to $66.8 million in the third quarter, compared to $59.4 million last year.

"Given the challenging economic environment, Liberty continues to focus, with intensity, on the basics of the business," said Willard G. Rouse III, the company's chief executive officer. "The most important contributor to our continued success is the performance of our core portfolio.

"We are pleased that Liberty maintained occupancy in the third quarter, during a time when the national occupancy rate for office and industrial properties declined," Rouse added. "During the coming months, our management team's experience in recessionary conditions should serve us well as we concentrate on maintaining our occupancy and rental growth and leasing our development pipeline."

It's been a tough month for most real estate equities, which have lost an average of more than 3 percent in October. But the future looks relatively bright.

The financial markets are remaining confident in real estate equities, especially when compared to other industries. On the year, REITs have increased in value by more than 6 percent. Equity REITs are up nearly 5 percent and mortgage REITs have posted a 57 percent gain.

Published: October 25, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net