• Alex Pettee, CFA

Election Day • REIT Earnings • Mall Revival?

Summary

  • U.S. equity markets finished higher Tuesday amid the busiest 24-hour stretch of corporate earnings season as investors are closely-watching elections which could set the tone of the near-term political agenda.

  • Following gains of 0.2% yesterday and climbing to fresh record-highs, the S&P 500 advanced another 0.4% today while the Mid-Cap 400 climbed 0.2% and the Small-Cap 600 rose 0.3%.

  • Powered by strong REIT earnings results, real estate equities were mostly higher today with the Equity REIT Index gaining 0.5% today with 15-of-19 property sectors in positive territory.

  • Simon Property (SPG) rallied more than 6% after raising its guidance and hiking its dividend. SPG now sees its full-year FFO essentially in-line with its pre-pandemic baseline.

  • NexPoint Residential (NXRT) gained after reporting solid results including staggering 24.1% rent growth on new leases in Q3 and double-digit rent growth achieved on renewals.

Real Estate Daily Recap

U.S. equity markets finished higher Tuesday amid the busiest 24-hour stretch of corporate earnings season as investors are closely-watching elections this evening which could set the tone of the political agenda over the next year. Following gains of 0.2% yesterday and climbing to fresh record-highs, the S&P 500 advanced another 0.4% today while the Mid-Cap 400 climbed 0.2% and the Small-Cap 600 rose 0.3%. Real estate equities were mostly higher today with the Equity REIT Index gaining 0.5% today with 15-of-19 property sectors in positive territory while Mortgage REITs slipped 1.5%.

Equity REIT Earnings Updates

Last week, we published Halftime Report: Rents Are Absolutely Soaring. We're in the home stretch of real estate earnings season with roughly 75 REITs reporting third-quarter results this week. Stellar results from residential REITs continue to be the key themes early in earnings season as rents continue to rise at the fastest rate on record across essentially every market. We heard results from a dozen REITs over the last 24 hours and highlights of this afternoon's reports include Spirit Realty (SRC), Healthpeak (PEAK), Community Healthcare (CHCT), Life Storage (NSA), National Storage (NSA).

Mall: Simon Property (SPG) surged more than 6% after reporting strong results yesterday afternoon and raised both its dividend and its full-year guidance. SPG reported that its same-store NOI soared 24.5% in Q3 from the prior year and now sees full-year FFO growth of 27.3% - which puts it within 5% of its pre-pandemic FFO for full-year 2019. SPG also hiked its dividend by 10% to $1.65/share. Tanger Outlets (SKT) soared more than 15% after reporting better-than-expected results after also hiking its full-year guidance. SKT now sees FFO growth of 7.6% this year - up 890 bps from its prior outlook - but still which is 25% below its 2019-baseline.

Apartment: NexPoint Residential (NXRT) gained 1% after reporting solid results yesterday afternoon and raising its full-year outlook and hiking its dividend. NXRT reported staggering 24.1% rent growth on new leases in Q3 and double-digit rent growth achieved on renewals. NXRT now sees FFO growth of 8.2% for full-year 2021, up 140 bps from last quarter and sees NOI growth of 5.0% - up 100 bps from last year. Centerspace (CSR) was lower by 1.8% despite reporting solid results, raising its full-year FFO growth outlook to 5.0% - up 290 bps from last quarter - and raising its NOI outlook to 3.25% - up 200 bps from its prior outlook.

Storage: Public Storage (PSA) gained 2% after reporting better-than-expected results yesterday afternoon. PSA now sees full-year Core FFO growth of 19.2% - up 520 basis points from its prior outlook and also raised its full-year NOI outlook by 320 bps to 13.9%. PSA concurrently announced the acquisition of a portfolio of 56 self-storage facilities from All Storage for $1.5B, which are primarily located in the growing Dallas-Fort Worth market.

Net Lease: Realty Income (O) gained 1.6% after reporting strong results yesterday afternoon and raising its full-year FFO growth outlook to 5.5% - up 50 basis points from last quarter. National Retail (NNN) also gained 0.8% after boosting its full-year FFO growth outlook to 20.3% - up 180 bps from last quarter. Agree Realty (ADC) was roughly flat after reporting results that were generally in line with expectations. Broadstone (BNL) traded lower by 0.6% after lowering its full-year FFO outlook by a penny.

Cell Tower: SBA Communications (SBAC) rallied 3% after reporting results yesterday afternoon and boosting its full-year outlook. SBAC now sees full-year FFO growth of 13.0% - up 140 basis points from its prior outlook and site leasing revenue growth of 7.4% - up 50 bps from last quarter.

Mortgage REITs

Mortgage REITs were mostly lower today as residential mREITs slipped 1.1% but remain higher by 0.2% this week. Commercial mREITs declined 1.0% but remain higher by 0.6% this week. iStar (STAR) jumped more than 4% after reporting better-than-expected results this morning while New Residential (NRZ) gained 0.4% after also reporting solid results. New York Mortgage (NYMT) dipped 3.7% after reporting results this morning. This afternoon, we'll hear from Ellington Mortgage (EARN) and TPG Real Estate (TRTX).

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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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