Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Choppy Week • REITs Pull-Back • Dividend Increases

Summary

  • U.S. equity markets were mixed Friday, ending a choppy week with modest declines, as investors remain jittery about the recent climb in long-term interest rates and the implications for valuations.

  • Ending the week with declines of roughly 1.2%, the S&P 500 ETF finished lower by 0.2% today while Dow Jones Industrial Average slipped 234-points. The tech-heavy Nasdaq 100 gained 0.4%.

  • Real estate equities were laggards today despite another handful of dividend increases as the broad-based Equity REIT ETFs declined by 1.4% today with 16-of-19 property sectors in negative territory.

  • Apartment REIT UDR Inc (UDR) boosted its dividend by 0.7% while hotel REIT Apple Hospitality (APLE) resumed its dividend at $0.01 per share exactly one year after suspending its dividend.

  • Mortgage REIT Granite Point (GPMT) also boosted its dividend by 25%. We've now seen 51 equity REITs and 17 mortgage REITs raise their dividends this year, already eclipsing the full-year total from 2020.

Real Estate Daily Recap

U.S. equity markets were mixed Friday, ending a choppy week with modest declines, as investors remain jittery about the recent climb in long-term interest rates and the implications for valuations. Ending the week with declines of roughly 1.2%, the S&P 500 ETF (SPY) finished lower by 0.2% today while Dow Jones Industrial Average (DIA) slipped 234 points. Real estate equities were laggards today despite another handful of dividend increases as the broad-based Equity REIT ETFs (VNQ) declined by 1.4% today with 16-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) gained 1.2%.

Five of the eleven GICS equity sectors finished in positive territory on the day, led to the upside by the Communications (XLC) and Consumer Discretionary (NYSEARCA:XLY) sectors. The 10-Year Treasury Yield (IEF) was flat on the day but finished higher for the seventh-straight week. Homebuilders and the broader Hoya Capital Housing Index were mixed today ahead of a busy week of housing data in the week ahead. 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.

Commercial Equity REITs

Earlier this week, we published REITs: This Time Was Different. REITs recorded a sequential improvement across all critical metrics in Q4, powering a historic wave of dividend growth in early 2021. That wave of growth continued over the last 24 hours with another pair of dividend boosts yesterday afternoon from Apartment REIT UDR Inc (UDR), which boosted its dividend by 0.7%, and hotel REIT Apple Hospitality (APLE), which resumed its dividend at $0.01 per share exactly one year after suspending its dividend. We've now seen 51 equity REITs and 17 mortgage REITs raise their dividends this year, already eclipsing the full-year total from 2020.

Hotels: Condor Hospitality (CDOR) finished lower by more than 3% after reporting results yesterday afternoon. The small-cap hotel REIT that owns 15 hotels reported that its occupancy decreased slightly in Q4 from the prior quarter, consistent with other hotel REITs that reported muted occupancy gains in Q4. Like other hotel REITs, CDOR's management sees a meaningful recovery in the back-half of 2021. TSA Checkpoint data has shown a mild recovery in travel demand in recent months as the pace of vaccinations has increased but remains at just 52% of 2019-levels over the past week.

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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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