• Alex Pettee, CFA

Another Strong Week For REITs

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.

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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.

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