Rental income is the lifeblood of real estate. Without it, property funds are not able to pay distributions to shareholders and borrowers cannot service their debt. The contractual nature of property rental income, a key feature of the asset class, underpins asset values and by extension property and fund returns. The Covid-19 pandemic has put occupiers under financial pressure, which has in turn stressed property funds’ rental income. We analysed fund-and asset-level data for 107 property funds in the UK, Europe, Australia and North America to assess the impact of slowing net-income growth on distribution yields, performance and debt-service ratios during the Covid-19 pandemic. Our analysis suggests that real estate investors may want to consider new ways of analysing income risk and benchmarking the income performance of their portfolios.

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