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  • Alex Pettee, CFA

Mall Bankruptcy • Rates Rise • Dividend Boost

Summary

  • U.S. equity markets finished sharply lower Thursday, continuing a tech-led sell-off, as long-term interest rates resumed their march higher following comments from Fed Chair Powell and an OPEC production freeze.

  • Declining for the third-straight day, the S&P 500 finished lower by 1.3% today while the tech-heavy Nasdaq 100 dipped another 2% and sits on the cusp of correction territory.

  • Real estate equities were mostly lower - but outperformed most other equity sectors - as the broad-based Equity REIT ETFs finished lower by 1.2% with 15-of-19 property sectors in negative-territory.

  • Mall REIT Washington Prime Group (WPG) plunged more than 60% on reports that the troubled landlord is considering Chapter 11 proceedings as creditor talks faltered.

  • Global Medical REIT (GMRE) boosted its dividend yesterday afternoon, becoming the 34th equity REIT to raise its payouts thus far in 2021, one of the strongest starts to a year for REIT dividend growth on record.

Real Estate Daily Recap

U.S. equity markets finished sharply lower Thursday, continuing a tech-led sell-off, as long-term interest rates resumed their march higher following comments from Fed Chair Powell and an OPEC output freeze. Declining for the third-straight day, the S&P 500 ETF (SPY) finished lower by 1.3% today while the Dow Jones Industrial Average (DIA) declined by 347 points. The tech-heavy Nasdaq 100 (QQQ) dipped another 2% and sits on the cusp of correction territory. Real estate equities were mostly lower - but outperformed most other equity sectors - as the broad-based Equity REIT ETFs (VNQ) finished lower by 1.2% with 15-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) pulled back by 1.7%.

Jitters over rising interest rates rattled markets again today despite generally dovish comments from Fed Chair Powell as the 10-Year Treasury Yield (IEF) jumped 8 basis points today to the highest closing level since last February. Investors are concerned that the proposed $1.9 billion stimulus package - which has received criticism for being overly partisan and untargeted - threatens to overheat the economy and result in higher levels of inflation. Ten of the eleven GICS equity sectors finished lower today, dragged on the downside by the Consumer Discretionary (XLY) and Technology (XLK) sectors

Malls: Washington Prime Group (WPG) plunged more than 60% on reports that the mall REIT is considering Chapter 11 proceedings as creditor talks faltered after the company skipped a $23M interest payment due last month. Last month, the REIT said it was using a 30-day grace period to continue talks with its lenders, but those talks have been faltering, Bloomberg reports. The plan to file for Chapter 11 could change if the talks make progress or if the grace period is extended, the people said. Despite mildly improving rent collection and foot traffic, Q4 was another epically-bad quarter for mall REITs following a historic plunge in Q3 in which FFO plunged by an average of 47% from last year.

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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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