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  • Alex Pettee, CFA

Crypto Crackdown • REIT Dividend Boost • Tech Rebound

Summary

  • U.S. equity markets rebounded Thursday after geopolitical tensions in the Middle East appear to ease while jobless claims data showed the lowest-level of initial claims since the pandemic began.

  • Snapping a three-day losing streak, the S&P 500 rallied 1.1% today while the Mid-Cap 400 rose by 0.5% and the Small-Cap 600 gained 0.3%. The tech-heavy Nasdaq 100 jumped 1.9%.

  • Real estate equities among the leaders today with the Equity REIT Index rising 1.1% with 13 of 19 property sectors in positive territory while the Mortgage REIT Index gained 0.4%.

  • Cryptocurrencies including Bitcoin (BTC-USD) rebounded despite new proposals to regulate the digital asset following yesterday's plunge which sparked concerns that the "crypto bubble" may unwind and result in potentially systemic fallout.

  • CoreSite Realty (COR) gained about 1% after boosting its dividend by 3.3% to $1.27/share, becoming the fourth data center REIT and 55th equity REIT to raise its dividend so far this year.

Real Estate Daily Recap

U.S. equity markets rebounded Thursday after geopolitical tensions in the Middle East appear to ease while jobless claims data showed the lowest-level of initial claims since the pandemic began. Snapping a three-day losing streak, the S&P 500 (SPY) rallied 1.1% today while the Mid-Cap 400 (MDY) rose by 0.5% and the Small-Cap 600 (SLY) gained 0.3%. The tech-heavy Nasdaq 100 (QQQ) jumped nearly 2%. Real estate equities among the leaders today with the Equity REIT Index rising 1.1% with 13 of 19 property sectors in positive territory while the Mortgage REIT Index gained 0.4%.

Cryptocurrencies including Bitcoin (BTC-USD) rebounded despite new proposals to regulate the digital asset following yesterday's plunge which sparked concerns that the "crypto bubble" may unwind and result in potentially systemic fallout. Ten of the eleven GICS equity sectors finished higher on the day, led to the upside by the Technology (XLK) and Communications (XLC) sector. Homebuilders and the broader Hoya Capital Housing Index rebounded as well ahead of Existing Home Sales data tomorrow which is expected to show a further intensification of the nationwide housing shortage as robust demand clashes with historically low supply.

Commercial Equity REITs

Data Center: CoreSite Realty (COR) gained about 1% after boosting its dividend by 3.3% to $1.27/share, becoming the fourth data center REIT and 55th equity REIT to raise its dividend so far this year. All five data center REITs increased their dividend in 2020 - one of just two REIT sectors that can claim that distinction. Still very much a "growth-oriented" property sector, data center REITs pay an average dividend yield of 2.2%, but with COR's dividend increase, it now pays a forward yield of roughly 4.3%.

Malls: Today, we published Mall REITs: Only The Strong Shall Survive. Despite reporting record-low occupancy rates and rental rate spreads, mall REITs have been the best-performing property sector this year, riding the vaccine-driven reopening rotation to gains of more than 40%. While rent collection rates have improved to around 90%, Q1 results showed that vacancy rates continued to climb. Simon is the lone mall REIT projecting positive FFO growth this year and has shown some "fight" and creativity in its capital allocation, sponsoring a SPAC and continuing to buy distressed retail brands. Dismal earnings reports from mall REITs came despite the strongest year for retail sales in history. Outside of Simon, the remainder of the mall sector remains in a fight for survival with an uncertain future.

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 0.3% today to push their weekly gains to 1.2%. Commercial mREITs finished higher by 0.6% and are now higher by 1.4% on the week. As discussed in our Earnings Recap, the average residential mREIT reported a 1.1% increase in its tangible BVP in Q1 from the prior quarter while the average commercial mREIT reported a 0.3% decline in its tangible BVPS in Q1. Residential mREITs pay an average dividend yield of 8.5% while commercial mREITs pay an average yield of 6.9%.

REIT Preferreds & Bonds

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.21% today, on average, but underperformed their respective common stock issues by an average of 0.58%. Over in the bond markets, STORE Capital priced a private offering of $515M of long-term fixed-rate notes in four tranches with interest rates ranging from 2.12% to 3.70% and maturities ranging from 7-12 years. Innovative Industrial (IIPR) priced a private offering of $300M principal amount of 5.50% Senior Notes due 2026 to fund additional cannabis-related real estate acquisitions. Finally, Xenia Hotels (XHR) announced plans to offer $400M of senior notes due 2029 to repay borrowings under certain of the company's credit facilities.

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: 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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