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  • Alex Pettee, CFA
  • U.S. equity markets rallied for the third straight week - with the major indexes recapturing record highs - following a strong start to corporate earnings season which temporarily quelled stagflation concerns.

  • Rallying for the third straight week to fresh record highs following a September stumble, the S&P 500 gained 1.6% on the week while Mid Caps rallied 1.7% and Small Caps advanced 1.2%.

  • Real estate equities led the way once again this week, powered by a strong start to earnings season, a continued wave of dividend hikes, and a flurry of M&A developments.

  • Strong results from Equity LifeStyle, Crown Castle, and Rexford were highlights of the REIT earnings slate this week. On the M&A front, two technology REITs - CyrusOne and Uniti - may be nearing a sale.

  • Homebuilders were also among the leaders following strong earnings reports and a better-than-expected slate of housing data including a report showing the historic surge in rents has shown few signs of cooling.

Click Here To Read The Full Report on Seeking Alpha!


Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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 Friday - but were broadly higher on the week - as weak earnings and a cautious outlook from Snap sparked a sell-off across social media stocks.

  • Finishing the week with cumulative gains of 1.6%, the S&P 500 slipped 0.1% and the tech-heavy Nasdaq 100 dipped nearly 1% but the Mid-Cap 400 and Small-Cap 600 each finished fractionally higher.

  • Real estate equities were broadly higher today and on the week as the Equity REIT Index gained 0.4% today - and 2.5% on the week - with 10-of-19 property sectors higher today.

  • Net lease REIT Alpine Income (PINE) finished higher by roughly 1% today after reporting solid third-quarter results and boosting its full-year guidance.

  • We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

Real Estate Daily Recap

U.S. equity markets were mixed Friday - but were broadly higher on the week - as weak earnings and a cautious outlook from Snap (SNAP) sparked a sell-off across social media stocks. Finishing the week with cumulative gains of 1.6%, the S&P 500 slipped 0.1% and the tech-heavy Nasdaq 100 dipped nearly 1% but the Mid-Cap 400 and Small-Cap 600 each finished fractionally higher. Real estate equities were broadly higher today and on the week as the Equity REIT Index gained 0.4% today - and 2.5% on the week - with 10-of-19 property sectors higher today while Mortgage REITs slipped 0.2%.

Seven of the eleven GICS equity sectors finished higher today, led to the upside by the Financials (XLF) and Energy (XLE) sectors while the Communications (XLC) sector dipped after Snap's (SNAP) earnings raised concern that Apple's (APLE) overhaul of ad-tracking in iPhone has upended the online ad market. We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

Equity REITs & Homebuilders

Earlier this week, we published our Real Estate Earnings Preview. Real estate earnings season kicks off this week, and over the next month, we'll hear results from more than 175 equity REITs, 40 mortgage REITs, and dozens of housing industry companies. Residential REITs and specialty REIT sectors - billboard, cannabis, and timber REITs - delivered the strongest returns over the last quarter. Large-cap technology REITs have uncharacteristically lagged. The report discussed the major themes and metrics we'll be watching across each of the real estate property sectors this earnings season in what will surely be another newsworthy and potentially volatile several weeks.

Net Lease: Alpine Income (PINE) finished higher by roughly 1% today after reporting solid third-quarter results and boosting its full-year guidance. PINE - which has been acquiring properties at a breakneck pace since going public in late 2019 - now sees 2021 AFFO growth of nearly 44% from 2020, up 500 basis points from its prior outlook. For the net lease sector, it's back to "business as usual" as acquisition-fueled growth - the "bread and butter" of the sector - kicked back into gear in early 2021. Net lease REITs thrive in the "lower for longer" macroeconomic environment, so concerns over rising rates, inflation, and potential tax code changes have pressured valuations across the sector over the past quarter.

Mortgage REITs

Per our Mortgage REIT Tracker, mREITs were mostly lower today with residential mREITs slipping 0.2% but ended the week with total gains of 0.9% while commercial mREITs declined 0.6% today but need the week higher by 0.7%. On a relatively quiet day of newsflow ahead of the start of earnings season next week, Lument Financial (LFT) and New Residential (NRZ) led to the upside while Sachem Capital (SACH) underperformed. The average residential mREIT now pays a dividend yield of 8.4% while the average commercial mREIT pays a dividend yield of 6.5%.

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

To Continue Reading, Click Here To Visit Seeking Alpha!


Join our Mailing List on our Website

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: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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 stretched their rally to a seventh straight session today as a strong start to earnings season, better-than-expected housing data, and moderating energy prices temporarily quelled stagflation concerns.

  • Real estate equities were mixed today amid a busy slate of earnings and M&A news with the Equity REIT Index finishing higher by 0.2% but 12-of-19 property sectors were in negative territory.

  • Rexford (REXR) - a logistics-focused REIT operating primarily in southern California - rallied after reporting another "beat and raise" quarter, boosting its full-year FFO growth outlook to 21.6%.

  • WeWork (WE) successfully went public via a SPAC roughly two years after its failed IPO. The SPAC merger valued WeWork at $9 billion, roughly 80% below its peak fundraising valuation of $47B in 2019.

  • Cell Tower REIT Uniti Group (UNIT) soared nearly 10% following reports that a group including Zayo Group is seeking to acquire the technology REIT and its primary client, Windstream Holdings.

Real Estate Daily Recap

U.S. equity markets stretched their rally to a seventh straight session today as a strong start to earnings season, better-than-expected housing data, and moderating energy prices temporarily quelled stagflation concerns. Closing at fresh record-highs, the S&P 500 and Mid-Cap 400 were each higher by 0.2% while but Small-Cap 600 slipped 0.4%. Real estate equities were mixed today amid a busy slate of earnings and M&A news with the Equity REIT Index finishing higher by 0.2% but 12-of-19 property sectors were in negative territory while Mortgage REITs gained 0.1%.

Ahead of another slate of key earnings reports this afternoon, six of the eleven GICS equity sectors were higher on the day, led to the upside by the Consumer Discretionary (XLY) sector on strong results from Tesla (TSLA). Energy (XLE) stocks - along with the broader Commodity (DJP) complex pulled back today but remain higher by more than 50% this year. Homebuilders and the broader Hoya Capital Housing Index were mixed today despite better-than-expected Existing Home Sales data which came despite an ongoing housing supply crunch with just 2.4 months of supply. Driven by strong demand and low supply, home prices were 13.3% higher than last year, but the annual gains have finally begun to moderate.

Equity REITs & Homebuilders

Earlier this week, we published our Real Estate Earnings Preview. Real estate earnings season kicks off this week, and over the next month, we'll hear results from more than 175 equity REITs, 40 mortgage REITs, and dozens of housing industry companies. Residential REITs and specialty REIT sectors - billboard, cannabis, and timber REITs - delivered the strongest returns over the last quarter. Large-cap technology REITs have uncharacteristically lagged. The report discussed the major themes and metrics we'll be watching across each of the real estate property sectors this earnings season in what will surely be another newsworthy and potentially volatile several weeks.

Industrial: Rexford (REXR) - a logistics-focused REIT operating primarily in southern California - rallied after reporting another "beat and raise" quarter yesterday afternoon, boosting its full-year FFO growth outlook by a whopping 830 basis points to 21.5% and its NOI outlook by 230 bps to 11.8%. First Industrial (FR) - which operates a more "legacy" warehouse portfolio in the Midwest and Sunbelt - declined after reporting results that roughly in line with estimates. FR boosted its full-year FFO growth outlook to 6.0% - up 110 bps from its prior outlook - and its NOI outlook to 4.5% - up 20 bps from its prior outlook. Last week, sector stalwart Prologis (PLD) kicked off earnings season with strong results, raising its full-year FFO growth target to 8.4%.

Cell Tower: Crown Castle (CCI) - the second-largest REIT by market capitalization - finished higher today after reporting Q3 results yesterday afternoon that were roughly in line with analysts' estimates. Snapping a streak of "beat-and-raise" reports for tower REITs dating back several quarters, CCI maintained its full-year Revenue and FFO outlook which calls for growth of 7.1% and 12.0%, respectively. CCI also introduced 2022 guidance which calls for full-year Revenue and FFO growth of 4.8% and 7.8% - representing a mild slowdown in growth from 2021, but these initial targets are essentially in line with the original targets provided for this year as well. CCI also boosted its dividend by 11%, becoming the 111th REIT to raise its payout this year.

Data Center: Sticking in the technology REIT sector, Uniti Group (UNIT) soared nearly 10% following reports that a group including Zayo Group is seeking to acquire the technology REIT and its primary client, Windstream Holdings - which has been in financial difficulty through much of the past decade. Zayo Group is owned, in part, by digital infrastructure REIT DigitalBridge (DBRG) along with private equity firm EQT, which took it private in 2020 for $8B. Back in June, UNIT and Zayo Group discussed a potential acquisition at roughly $15 but talks did not advance. Terms of the new potential deal were not disclosed, but UNIT pegged its estimated warranted share price at $20-30 in a recent presentation for its Q2 2021 earnings.

Office: SL Green (SLG) slipped today despite reporting results that were roughly in line with estimates and modestly raising its 2021 FFO per share guidance. SLG - which focuses on high-end properties primarily in NYC - has performed relatively well throughout the pandemic despite the absence of workers actually coming into the office space rented by many of the largest companies in the U.S. SLG - which was one of a handful of office REITs that reported positive FFO growth in 2020 - sees its full-year FFO declining by 7.9% this year at the new midpoint of its range, up slightly from its prior outlook for a roughly 8.5% decline. Elsewhere, office subletting firm WeWork (WE) successfully went public via a SPAC roughly two years after its failed IPO. The SPAC merger valued WeWork at $9 billion, roughly 80% below its peak fundraising valuation of $47B in 2019.

Mortgage REITs

Per our Mortgage REIT Tracker, mREITs were mostly-higher today with commercial mREITs gaining 0.3% and are now higher by 1.4% this week while residential mREITs climbed 0.2% to push their weekly gains to 1.2%. On a relatively quiet day of newsflow ahead of the start of earnings season next week, Hannon Armstrong (HASI) and Great Ajax (AJX). The average residential mREIT now pays a dividend yield of 8.7% while the average commercial mREIT pays a dividend yield of 6.5%.



Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

To Continue Reading, Click Here To Visit Seeking Alpha!


Join our Mailing List on our Website

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: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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.