• Alex Pettee, CFA

Dividend Boosts • Gamestop Hearing • REIT Earnings

Summary

  • U.S. equity markets were broadly lower Thursday following a downbeat slate of economic data while all eyes were on a fiery Congressional hearing related to last month's short squeeze frenzy.

  • Declining for the third-straight day, the S&P 500 finished lower by 0.4% today while the Dow Jones Industrial Average slipped 120 points. Mid-Caps and Small-Caps each dipped more than 1%.

  • Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs finished lower by 0.4% with 14-of-19 property sectors in negative-territory.

  • Amid another frenetic slate of REIT earnings reports, Mortgage REIT NexPoint Real Estate (NREF) boosted its dividend by 19%. Meanwhile, shopping center REIT RPT Realty reinstated its previously suspended dividend.

  • Troubled retail REIT Tanger Outlets (SKT) reported that leasing spreads and occupancy rates remain in free fall. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021.

Real Estate Daily Recap

U.S. equity markets were broadly lower Thursday following a generally downbeat slate of economic data this morning while all eyes were on a fiery Congressional hearing related to last month's short-squeeze frenzy. Declining for the third-straight day, the S&P 500 ETF (SPY) finished lower by 0.4% today while the Dow Jones Industrial Average (DIA) slipped 120 points. Mid-Caps (MDY) and Small-Caps (NYSEARCA:SLY) dipped more than 1% each. Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs (VNQ) finished lower by 0.4% with 14-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) declined by 1.7%.

Nine of the eleven GICS equity sectors finished in negative territory today as the Energy (XLE) sector pulled-back as the Southern U.S. begins to thaw after this week's deep freeze. Economically-sensitive sectors including Financials (NYSEARCA:XLF) and Materials (XLB) were among the laggards after Jobless Claims data showed that the employment recovery took a step back last week after trending in a positive direction in late January. Homebuilders and the broader Hoya Capital Housing Index also pulled back today on a mixed residential construction report as Building Permits surged but Housing Starts pulled back as poor weather and limited lumber availability constrained construction in January as builders continue to see homes as fast as they can build them.

Malls: Tanger Outlets (SKT) finished higher by 1.0% after reporting results yesterday afternoon. Consistent with the rest of the mall sector, the troubled retail REIT reported that leasing spreads and occupancy rates remain in free fall as SKT reported a substantial 5.3 percentage-point decline in occupancy rates in Q4 compared to the prior year. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021. Similar to the other mall REITs, the 95% "headline" collection rate overstates the true rate of collection as Tanger has collected roughly 82% of initially billed rents since the start of Q2.

Data Center: CyrusOne (CONE) finished lower by 1.4% despite reporting its strongest quarter ever of leasing activity as the firm signed $49.3 million in incremental annualized revenues, bringing the total for the data center sector to $229 million in Q4, which eclipsed the prior record set in Q2. Forward guidance was softer-than-expected, however, as CONE sees AFFO/share growth of just 1.3% next year at the midpoint of its range after recording growth of 7.4% in 2020. As we'll discuss in our upcoming Data Center REIT report published this evening on The REIT Forum, data center REITs have taken a breather so far in 2021 despite a strong slate of earnings reports.

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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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