• Alex Pettee, CFA

Builders Lead • REIT M&A • Earnings Updates

Summary

  • U.S. equity markets snapped an eight-day winning streak Tuesday amid pressure on large-cap technology stocks while fresh inflation data showed that producer prices rose at the highest annual pace on record.

  • Following gains of 0.1% yesterday, the S&P 500 slipped 0.3% today while the Mid-Cap 400 declined 0.1% and the Small-Cap 600 retreated 0.3%. The tech-heavy Nasdaq 100 declined 0.7%.

  • Real estate equities were among the leaders today as the Equity REIT Index advanced 0.2% today with 12-of-19 property sectors in positive territory while Mortgage REITs gained 0.1%.

  • Preferred Apartments (APTS) soared nearly 10% after reporting strong third-quarter results and boosted its full-year outlook, citing strong rental growth across its Sunbelt multifamily markets.

  • Homebuilders were a bright spot today, led to the upside by DR Horton (DHI) - the nation's largest homebuilder - which rallied more than 5% after issuing strong 2022 guidance and boosting its dividend by 13%.

Income Builder Daily Recap

U.S. equity markets snapped an eight-day winning streak Tuesday amid pressure on large-cap technology stocks while fresh inflation data showed that producer prices rose at the highest annual pace on record. Following gains of 0.1% yesterday, the S&P 500 slipped 0.3% today while the Mid-Cap 400 declined 0.1% and the Small-Cap 600 finished lower by 0.3%. The tech-heavy Nasdaq 100 declined by 0.7%. Real estate equities were among the leaders today as the Equity REIT Index advanced 0.2% today with 12-of-19 property sectors in positive territory while Mortgage REITs gained 0.1%.

Equity REIT Earnings Updates

Data Center: The first day of REITworld - one of two REIT industry conferences each year- came with interesting M&A news. CoreSite (COR) rallied 2% after a report that the company is exploring a potential sale, having reportedly been approached by cell tower REIT American Tower (AMT) and fellow data center REIT Digital Realty (DLR), as well as private equity firms on a potential deal, according to a Reuters report, which cited people familiar. The potential deal follows Blackstone's (BX) $10B acquisition of QTS Realty (QTS) earlier this year and comes amid similar discussions related to a potential sale of CyrusOne (CONE). Earlier this year in Go Big or Go Home, we speculated that the M&A boom in the space was just getting started with DLR and EQIX sitting on ample dry powder.

Apartments: Preferred Apartments (APTS) soared nearly 10% after reporting strong third-quarter results and boosted its full-year outlook, citing strong rental growth across its Sunbelt multifamily markets. APTS - which has sold many of its non-apartment-related assets over the last year - now sees multifamily NOI growth of 6.25% - up 25 basis points from last quarter - and raised its FFO outlook from $0.95 to $1.04 at the midpoint of its range.

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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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