Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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Summary

  • U.S. equity markets were mixed Friday, ending the week with modest declines, as a strong slate of economic and housing data propelled inflation expectations and interest rates to mid-pandemic highs.

  • Ending the week with declines of 0.7%, the S&P 500 finished lower by 0.2% today while the Dow Jones Industrial Average was higher by a point. Mid-Caps and Small-Caps rallied 1.5% each.

  • Real estate equities were broadly higher today following another wave of dividend boosts and solid earnings reports as the broad-based REIT ETFs finished higher by 0.6%. 17-of-19 property sectors finished higher.

  • The wave of dividend boosts across the REIT sector continued over the last 24 hours as two more equity REITs and two mortgage REITs raised their payouts. 26 REITs have raised their dividend this year.

  • Existing Home Sales were stronger-than-expected in January as the housing industry continues to lead the early economic recovery. Housing inventory levels dipped to historic lows as homebuilders struggle to keep up with surging demand.

Real Estate Daily Recap

U.S. equity markets were mixed Friday, ending the week with modest declines, as a generally strong slate of economic and housing data propelled inflation expectations and interest rates to mid-pandemic highs. Ending the week with declines of 0.7%, the S&P 500 ETF (SPY) finished lower by 0.2% today while the Dow Jones Industrial Average (DIA) was higher by a point. Mid-Caps (MDY) and Small-Caps (SLY) each rallied more than 1.5% today, however, to finish essentially even with the large-cap indexes on the week. Real estate equities were broadly higher today following another wave of dividend boosts and solid earnings reports as the broad-based Equity REIT ETFs (VNQ) finished higher by 0.6% with 17-of-19 property sectors in positive territory while the Mortgage REIT ETFs (REM) rallied nearly 3%.

The economically-sensitive GICS equity sectors rallied today as the Materials (XLB), Energy (XLE), and Industrials (XLI) led to the upside. The 10-Year Treasury Yield (IEF) climbed to the highest level since last March after PMI data in the U.S. and Europe topped estimates while Existing Home Sales also showed continued strength behind the housing-led recovery, lifting homebuilders and the broader Hoya Capital Housing Index to solid gains. We'll publish a full analysis and commentary of this week's developments in the real estate industry including more than 50 REIT earnings reports, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

On that point, the National Association of Realtors reported this morning that Existing Home Sales were stronger-than-expected in January, rising 0.6% from last month and were 23.7% from the prior year. The median existing-home sales price rose to $303,900, 14.1% higher from one year ago. First-time buyers were responsible for 33% of sales in January, up from 31% in December 2020 and from 32% in January 2020. The positive momentum has shown few signs of slowing, according to data from Redfin (RDFN), which reported today that its measure of home sales were 20% higher in January, the third-highest gain on record since at least 2013.

One of the emerging constraints on the further upside for New and Existing Home Sales is the simple lack of homes available to sell as homebuilders - along with materials providers along the value chain including Timber REITs - scramble to meet the insatiable demand. On the existing sales side, the NAR reported that housing inventory fell to a record-low of 1.04 million units, down by 25.7% year-over-year – a record decline. Properties remained on the market for just 21 days in January, a historically low rate, while the months supply at the current sales pace stood at just 1.9 months, also at historic lows. Some much-needed supply is on the way, but not nearly enough to equalize the supply/demand imbalance as total housing starts rose 7.8% in 2020.

Real Estate Earnings Update

The wave of dividend boosts across the REIT sector continued over the last 24 hours as two more equity REITs and two mortgage REITs raised their payouts as discussed in REIT Earnings Halftime Report: Dividend Revival. ExtraSpace (EXR) boosted its dividend to $1.00/share, an 11.1% increase from its prior dividend of $0.90. Urban Edge (UE) reinstated its dividend at $0.15/share, obviously above its prior rate of $0.0, but below its pre-pandemic dividend of $0.22 declared. Earlier in the week, Medical Properties (MPW), Essex Properties (ESS), and RPT Realty (RPT) each boosted their payouts as well, bringing the 2021 total to 23.

Net Lease: Spirit Realty (SRC) finished higher nearly 5% after reporting this morning that it sees its AFFO/share bouncing back in 2021 with 3.4% growth following the 11.7% decline in 2020, which was the third straight year of double-digit-percentage AFFO/share declines. Agree Realty (ADC) lower higher by about 1% after reporting yesterday afternoon that it ended 2020 with full-year AFFO/share growth of 6.0%, one of the only net lease REITs to report positive growth. Fueling this growth has been external acquisitions as ADC remains one of the few net lease REITs that remained in "growth mode" throughout the pandemic. ADC acquired $300m in additional assets in 2020 and sees net asset growth of $850m in 2021 at the midpoint of its guidance.

Hotels: Host Hotels (HST) finished higher by 4.2% after reporting yesterday afternoon that it expects its hotel portfolio to return to profitability in the aggregate sometime during H2 2021 based on hotel level EBITDA. HST noted positive trends in January in group bookings, but saw its occupancy rate improve only marginally in Q4 compared to Q3 to 19.4%. According to TSA Checkpoint data, airline travel bottomed in early April at just 4% of its prior-year, and after recovering to just shy of 50% during the Christmas holiday season, the last two months have trended sideways suggesting that Q1 won't be too much better than Q4 for hotel REITs.

Industrial: Americold (COLD) finished higher by 4.0% after reporting yesterday afternoon that recorded full-year AFFO/share growth of 10.3% and sees another impressive year of 9.3% growth in 2021 at the midpoint of its guidance range. COLD recorded same-store NOI growth of 4.0% in 2020 and sees a continued acceleration to 4.5% growth in 2021 as fundamentals across the industrial space - including COLD's nice of temperature-controlled logistics space - reman as strong as any REIT sector.

Manufactured Housing: On Wednesday, Sun Communities (SUI) reported another strong quarter as the manufactured housing sector continues to feel the tailwinds from the mounting shortage of affordable housing. SUI reported that its FFO/share rose by 3.5% in 2020 - a deceleration from its nearly 9% average growth over the prior four years - but expects to get it all back in 2021 as FFO is expected to surge by more than 15%. Results for both SUI and Equity Lifestyle (ELS) were negatively impacted by shutdowns in their RV parks during the peak of the pandemic while occupancy rates in their manufactured housing facilities remain at historic highs.

Healthcare: On Wednesday, Ventas (VTR) reported a mixed quarter as the senior housing segment remains under intense pressure from the pandemic. VTR recorded same-store NOI growth of -11.8% in Q4 compared to last year with its Senior Housing Operating ("SHOP") portfolio declining by -24.7%, partially offset by 2.9% growth in its medical office segment. Sequentially, however, NOI rose 4.4% from the prior quarter with its SHOP portfolio rising 13.4%. Forward guidance indicates that SHOP will continue to see occupancy declines in Q1, but the company commented that "Leading indicators and demand are again showing strength, with leads in January at the highest level since the beginning of the pandemic."

We're now on the home stretch of another newsworthy REIT earnings season. Results thus far have generally been better than expected as dividend cuts have given way to dividend boosts. 23 equity REITs have now boosted their dividend this year, the majority of which were among the 52 REITs that increased their dividend last year. Rent collection - and interest collection for mREITs - has recovered to "normalized" levels across all major property sectors outside of retail. The final stretch of earnings season could bring more fireworks as many of the more-troubled REITs have yet to report results.

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The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

Summary

  • U.S. equity markets were broadly lower Thursday following a downbeat slate of economic data while all eyes were on a fiery Congressional hearing related to last month's short squeeze frenzy.

  • Declining for the third-straight day, the S&P 500 finished lower by 0.4% today while the Dow Jones Industrial Average slipped 120 points. Mid-Caps and Small-Caps each dipped more than 1%.

  • Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs finished lower by 0.4% with 14-of-19 property sectors in negative-territory.

  • Amid another frenetic slate of REIT earnings reports, Mortgage REIT NexPoint Real Estate (NREF) boosted its dividend by 19%. Meanwhile, shopping center REIT RPT Realty reinstated its previously suspended dividend.

  • Troubled retail REIT Tanger Outlets (SKT) reported that leasing spreads and occupancy rates remain in free fall. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021.

Real Estate Daily Recap

U.S. equity markets were broadly lower Thursday following a generally downbeat slate of economic data this morning while all eyes were on a fiery Congressional hearing related to last month's short-squeeze frenzy. Declining for the third-straight day, the S&P 500 ETF (SPY) finished lower by 0.4% today while the Dow Jones Industrial Average (DIA) slipped 120 points. Mid-Caps (MDY) and Small-Caps (NYSEARCA:SLY) dipped more than 1% each. Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs (VNQ) finished lower by 0.4% with 14-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) declined by 1.7%.

Nine of the eleven GICS equity sectors finished in negative territory today as the Energy (XLE) sector pulled-back as the Southern U.S. begins to thaw after this week's deep freeze. Economically-sensitive sectors including Financials (NYSEARCA:XLF) and Materials (XLB) were among the laggards after Jobless Claims data showed that the employment recovery took a step back last week after trending in a positive direction in late January. Homebuilders and the broader Hoya Capital Housing Index also pulled back today on a mixed residential construction report as Building Permits surged but Housing Starts pulled back as poor weather and limited lumber availability constrained construction in January as builders continue to see homes as fast as they can build them.

Malls: Tanger Outlets (SKT) finished higher by 1.0% after reporting results yesterday afternoon. Consistent with the rest of the mall sector, the troubled retail REIT reported that leasing spreads and occupancy rates remain in free fall as SKT reported a substantial 5.3 percentage-point decline in occupancy rates in Q4 compared to the prior year. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021. Similar to the other mall REITs, the 95% "headline" collection rate overstates the true rate of collection as Tanger has collected roughly 82% of initially billed rents since the start of Q2.

Data Center: CyrusOne (CONE) finished lower by 1.4% despite reporting its strongest quarter ever of leasing activity as the firm signed $49.3 million in incremental annualized revenues, bringing the total for the data center sector to $229 million in Q4, which eclipsed the prior record set in Q2. Forward guidance was softer-than-expected, however, as CONE sees AFFO/share growth of just 1.3% next year at the midpoint of its range after recording growth of 7.4% in 2020. As we'll discuss in our upcoming Data Center REIT report published this evening on The REIT Forum, data center REITs have taken a breather so far in 2021 despite a strong slate of earnings reports.

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Join our Mailing List on our Website

The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

  • Alex Pettee, CFA

Summary

  • U.S. equity markets were mixed Wednesday as concerns over the inflationary and economic impact of the Southern 'Deep Freeze' was offset by a strong slate of economic and housing data.

  • Following declines of 0.1% yesterday, the S&P 500 finished fractionally lower today while the Dow Jones Industrial Average finished higher by 90 points. Treasury yields were flat at mid-pandemic highs.

  • Real estate equities were mixed today amid a very busy 24-hours of earnings reports as the broad-based Equity REIT ETFs finished lower by 0.1% with 14-of-19 property sectors in negative-territory.

  • Homebuilder Sentiment Index - a leading indicator of housing activity - ticked higher to 84 in February, the third-strongest month on record. Mortgage applications to purchase a home are now higher by 15% from last year as demand has shown no signs of cooling.

  • Retail Sales were far stronger than consensus estimates in January. Consumers continued to spend on housing-related goods. Furniture sales surged 12% in the month while spending on Building Materials products were 19% higher from last year.

Real Estate Daily Recap

U.S. equity markets were mixed Wednesday as concerns over the inflationary impact of the Southern 'Deep Freeze' were offset by a strong slate of economic data as retail sales and homebuilder sentiment both topped estimates. Following declines of 0.1% yesterday, the S&P 500 ETF (SPY) finished fractionally lower today while the Dow Jones Industrial Average (DIA) finished higher by 90 points. Real estate equities were mixed today amid a very busy 24-hours of earnings reports as the broad-based Equity REIT ETFs (VNQ) finished lower by 0.1% with 14-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) dipped 2.0%.

Eight of the eleven GICS equity sectors finished in positive territory today, led to the upside by another strong day from the Energy (XLE) sector while Financials (XLF) have also delivered a strong week as the 10-Year Treasury Yield (IEF) remained at the highest levels since last March. Consistent with the pressure today on many of the top-performing stocks and sectors, homebuilders and the broader Hoya Capital Housing Index were mostly lower today despite a generally strong slate of housing data and earnings reports.

This morning, the NAHB reported that its Homebuilder Sentiment Index - a leading indicator of housing activity - ticked higher to 84 in February, the third-strongest month on record. Also this morning, the Mortgage Bankers Association reported that mortgage applications to purchase a home are now higher by 15% from last year as the housing industry remains a source of strength in the early economic recovery. However, applications for refinancing loans - which tend to be more interest-rate sensitive - have pulled back in recent weeks as mortgage rates have trended higher since hitting record lows in late January.

The Census Bureau reported that Retail Sales were far stronger than consensus estimates in January, surging by 5.3% from the prior month and were higher by 7.4% from last January before the pandemic began. Boosted by a second round of $600 stimulus checks, the strength was broad-based as all retail categories recorded a month-over-month increase. Consumers continued to spend on housing-related goods as Furniture sales surged 12% in the month while spending on Building Materials rose 4.6% to push its year-over-year gain to 19.0%. The department stores, clothing stores, and food services categories did show signs of life in January while e-commerce sales surged another 11.0% in January to push its annual increase to nearly 30%.

To Continue Reading, Click Here To Visit Seeking Alpha!


Join our Mailing List on our Website

The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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