• Alex Pettee, CFA

Mall Earnings • Fresh Records • Bitcoin's Back

Summary

  • U.S. equity markets extended their rally Monday with the major indexes eclipsing fresh record highs on improving coronavirus data and ahead of another frenetic slate of corporate earnings reports.

  • Following gains of 4.8% last week, the S&P 500 finished higher by another 0.7% today while the Dow Jones Industrial Average added another 237 points. Small-Caps jumped nearly 3%.

  • Real estate equities were mostly higher today as REIT earnings season kicks into high gear. The broad-based Equity REIT ETFs gained 0.5% today with 12-of-19 property sectors in positive territory.

  • Inflation data highlights this week's economic calendar. Bitcoin (BTC-USD) was also back in the headlines after Tesla (TSLA) announced an investment into the cryptocurrency.

  • Mall REIT stalwart Simon Property (SPG) reported Q4 results this afternoon, noting it collected 90% of rents since the start of the pandemic, but still recorded a -17.1% decline in full-year NOI and a -24.3% decline in FFO per share in full-year 2020.

Real Estate Daily Recap

U.S. equity markets extended their rally Monday with the major indexes eclipsing fresh record highs on improving coronavirus data and ahead of another frenetic slate of corporate earnings reports. Following gains of 4.8% last week, the S&P 500 ETF (SPY) finished higher by another 0.7% today while the Dow Jones Industrial Average (DIA) added another 237 points and the Small-Cap 600 (SLY) jumped nearly 3% Real estate equities were mostly higher today as REIT earnings season kicks into high gear. The broad-based Equity REIT ETFs (VNQ) gained 0.5% today with 12-of-19 property sectors in positive territory while Mortgage REITs (REM) gained 0.8%.

As discussed in our Real Estate Weekly Outlook, equity markets entered the week with positive momentum following a slate of stronger-than-expected corporate earnings reports as 81% of S&P 500 companies have beat EPS estimates thus far, among the highest on record. Bitcoin (BTC-USD) was also back in the headlines after Tesla (TSLA) announced an investment into the cryptocurrency. Ten of the eleven GICS equity sectors finished on the upside today led by the Energy (XLE), Financials (XLF), and Technology (XLK) sectors. Homebuilders and the broader Hoya Capital Housing Index also were upside standouts ahead of a busy slate of earnings results this week.

Following a busy three weeks of economic data, the week ahead will be relatively quieter, headlined by the Consumer Price Index report released on Wednesday. Inflation expectations - along with longer-term Treasury Yields - have rebounded sharply since Election Day on the prospects for additional fiscal stimulus and on improving coronavirus data, but recent inflation reports have yet to show a broad-based uptick in either consumer or producer price levels. We'll also be watching the weekly MBA Mortgage Application data on Wednesday and Jobless Claims data on Thursday.

Real Estate Earnings Update

Real estate earnings season kicks into high gear this week with roughly four dozen REITs reporting results along with a handful of housing companies. Last week, we published REIT Earnings Preview: Who Paid The Rent? While missed rents and dividend cuts were the prevailing themes in the REIT sector in mid-2020, the vaccine-driven sector rotation has been the dominant theme over the past quarter. Normalizing rent collection and positive dividend commentary could be a positive catalyst to continue the recovery. We expect a historic year for dividend increases following the wave of cuts last year.

Malls: Simon Property (SPG) is flat after-hours after reporting fourth quarter results. SPG reported that it collected 90% of rents for the second, third and fourth quarters, combined, but still recorded a -17.1% decline in full-year net operating income ("NOI") including a -23.9% year-over-year dip in Q4. SPG recorded a -24.3% decline in FFO per share in full-year 2020, but sees FFO bouncing back by 5.6% at the midpoint of its 2021 guidance range. Last week, we heard preliminary results from Macerich (MAC), which reported a 39% plunge in FFO per share for full-year 2020 and same-store NOI growth that declined by 33.3% in Q4 compared to the prior year. We also heard results from Brookfield Property (BPYU) last week, which reported a similar -25.5% year-over-year dip in same-store NOI in their retail segment.

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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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