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  • Alex Pettee, CFA

M&A Monday • Special Dividends • European Lockdowns

Summary

  • U.S. equity markets finished mostly lower Monday as the apparent success in reaching a long-awaited stimulus deal was offset by concerns over harsh new lockdown measures in Europe.

  • Coming off gains of 0.6% last week, the S&P 500 and tech-heavy Nasdaq 100 each finished lower by 0.4% today, but the Dow Jones Industrial Average gained 37 points.

  • Real estate equities were mostly lower on the day despite a flurry of dividend and M&A news. Equity REITs finished lower by 0.6% today 15-of-18 property sectors in negative territory.

  • M&A Monday: We saw some M&A news in the industrial REIT sector today as Monmouth (MNR) received an unsolicited offer to acquire the firm by Blackwells Capital. MNR had rallied over the past three weeks before news was publicly reported.

  • Two more mortgage REITs - PennyMac Mortgage (PMT) and Hunt Companies (HCFT) increased their quarterly dividends. Granite Point Mortgage (GPMT) declared a special dividend. Just two mREITs, however, will pay higher a dividend in full-year 2020 than 2019.

Real Estate Daily Recap

U.S. equity markets finished lower Monday, but well above their intra-day lows as the apparent success in reaching a long-awaited stimulus deal was offset by concerns over harsh new lockdown measures in Europe. Coming off gains of 0.6% last week, the S&P 500 ETF (SPY) and tech-heavy Nasdaq 100 (QQQ) each finished lower by 0.4% today, but the Dow Jones Industrial Average (DIA) gained 37 points. Real estate equities were mostly lower on the day despite a flurry of dividend and M&A news as the broad-based Equity REIT ETF (VNQ) finished lower by 0.6% today with 15 of 18 property sectors in negative territory. Mortgage REITs (REM) declined by 0.5% on the day.

As discussed in our Real Estate Weekly Outlook, investors are closely monitoring progress on vaccine distribution which is expected to ramp-up this week following the approval of the Moderna (MRNA) vaccine on Friday night. 9 of the 11 GICS equity sectors finished lower on the day, dragged on the downside by the Energy (XLE) and Utilities (XLU) sectors. The Financials (XLF) sector gained following the Fed decision last Friday to allow banks to restart stock buybacks, loosening restrictions enacted early in the pandemic. Property technology firm RealPage (RP) surged after it agreed to be purchased by private equity firm Thoma Bravo in an all-cash deal, which lifted the Hoya Capital Housing Index ahead of a busy week housing data.

We have another jam-packed slate of economic and housing data in the Christmas-shortened week. On Tuesday, we'll see Existing Home Sales for November. Existing sales are expected to moderate slightly as inventory levels dipped to record-lows last month. On Wednesday, we'll see New Home Sales data for November, which are expected to continue their strong post-pandemic rebound. On Wednesday, we'll also see the FHFA House Price Index for October which is likely to show a continued reacceleration in home price appreciation, as well as the weekly MBA Mortgage Applications data. Markets close early on Thursday and will be closed on Friday for Christmas.

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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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