Hoya Capital Research & Index Innovations  

Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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  • Alex Pettee, CFA

Jobs Day Ahead • Winning Streak • Hotel Reports

  • U.S. equity markets were broadly higher Thursday - the fourth-straight session of gains for the major benchmarks - while interest rates and commodities climbed ahead of a critical employment report.

  • Pushing its week-to-date gains to roughly 2%, the S&P 500 advanced 1.5% today, while the tech-heavy Nasdaq 100 rallied another 2.1% to push its weekly gains to nearly 5%.

  • Real estate equities have been laggards this week as interest rates have rebounded from their recent dip. The Equity REIT Index advanced 0.3% today led by hotel and retail REITs.

  • Consistent with the recent "bad news is good news" theme, the equity market rally was supported today by weaker-than-expected employment data with Initial Jobless Claims climbing to a six-month high last week.

  • Ashford (AHT) and Braemar (BHR) provided business updates this afternoon. AHT expects its Q2 RevPAR to be 6% below its comparable pre-pandemic rate while BHR expects its RevPAR to be 28% above its pre-pandemic level as surging room rates on luxury hotels have offset lagging occupancy rates.

Income Builder Daily Recap

U.S. equity markets were broadly higher Thursday - the fourth-straight session of gains for the major benchmarks - while interest rates and commodities climbed ahead of a critical employment report tomorrow morning. Pushing its week-to-date gains to roughly 2%, the S&P 500 advanced 1.5% today, while the tech-heavy Nasdaq 100 rallied another 2.1% to push its weekly gains to nearly 5%. Real estate equities have been laggards this week as interest rates have rebounded from their recent pull-back on recession fears. The Equity REIT Index finished higher by 0.3% today with 10 of 19 property sectors in positive territory while the Mortgage REIT Index rallied 1.5%.

Consistent with the recent "bad news is good news" theme, the equity market rally was supported today by weaker-than-expected employment data with Initial Jobless Claims climbing to a six-month high last week. The closely-watched nonfarm payrolls report tomorrow morning is expected to show job growth of roughly 260k in June which would be the lowest month-over-month increase since the start of the pandemic. Benchmark interest rates trended higher today with the 10-Year Treasury Yield climbing back above 3.01% - above its July low of 2.78% but well below its June high of 3.50%. Commodities prices rebounded sharply today, recovery from an early-week plunge driven by recession concerns. Ten of the eleven GICS equity sectors were higher on the day with Energy (XLE) and Consumer Discretionary (XLY) stocks leading the way while Utilities (XLU) lagged.


Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector


Mall: Economically-sensitive REITs - notably the most highly-levered mall and hotel REITs - dominated the performance leaderboard today. Pennsylvania REIT (PEI) rallied by nearly 10%, coinciding with a statement from activist firm Cygnus Capital, which has been seeking to gain board seats through their preferred share position. PREIT has the worst-performing REIT this year with declines of more than 70%, continuing a slide that began in mid-2021 as the clock is ticking for the troubled mall landlord to raise capital through asset sales to pay down its substantial debt load. Soaring fuel prices and persistent inflation have triggered a "rapid slowdown" in several retail categories in recent months at some major retailers, and we believe that a recession could be a final death blow to many lower-tier malls.


Hotels: Today we published Hotel REITs: Summer of Revenge Travel on the Income Builder Marketplace. Despite recession-like levels of consumer confidence and surging transportation costs, U.S. consumers have continued to travel this summer at rates approaching pre-pandemic levels, powering Hotel RevPAR to fresh record highs. Skepticism over the sustainability of this momentum, however, has dragged hotel REITs lower by nearly 25% over the past month after being the top-performing property sector for much of 2022. Concerns over a "demand bubble" appear warranted given the complexion of the recent boom, driven almost entirely by domestic leisure travel and surging urban room rates while business and international travel remain severely depressed. This afternoon, Ashford (AHT) and Braemar (BHR) provided business updates. AHT expects its Q2 RevPAR to be 6% below that of the comparable pre-pandemic quarter in 2019 while BHR expects its RevPAR to be 28% above its comparable 2019 level as surging nightly room rates on luxury hotels have offset lagging occupancy rates.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs rebounded today with residential mREITs advancing 1.5% while commercial mREITs gained 1.4%. On another quiet day of newsflow, upside standouts included Franklin BSP Realty (FBRT) and Great Ajax (AJX) while laggards included Granite Point (GPMT) and Dynex Capital (DX). The average residential mREIT now pays a dividend yield of roughly 13.2% while the average commercial mREIT pays a dividend yield of 9.3%.

REIT Preferreds & Capital Raising

Per the Income Builder Preferred Tracker available to Income Builder subscribers, REIT Preferred stocks finished lower by 1.20% today, on average. REIT Preferreds are lower by roughly 13% on a total return basis this year after ending 2021 with price returns of roughly 8.0% and total returns of roughly 14%. There are now roughly 180 REIT-issued exchange-listed preferred and debt securities with an average current yield of 7.06%.

Economic Data This Week

Employment data highlights another busy week of economic data in the Independence Day-shortened week ahead, headlined by JOLTS data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of roughly 260k in June which would be the lowest month-over-month increase since the start of the pandemic as the U.S. has now recovered 95% of the 22 million jobs lost from the COVID-related economic shutdowns. The unemployment rate, meanwhile, is expected to stay steady at 3.6%. Purchasing Managers' Index ("PMI") data will continue to be a major market focus - particularly in Europe and Asia - as recent reports have barely managed to hold on to the breakeven 50-level.


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.