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  • Alex Pettee, CFA

Omnibus Spending • Hotel Updates • REIT Short Squeeze?

  • U.S. equity markets finished broadly lower Thursday after the Senate passed a massive $1.7 trillion federal spending bill while jobless claims data raised questions over the outlook for waning inflation.

  • Erasing its gains on the week and trading back at its lowest-levels since early November, the S&P 500 slipped 1.5% today while the Nasdaq dipped 2.5%- declining in six-of-seven sessions.

  • Real estate equities were among the better performers today with the Equity REIT Index finishing off by 0.4% today with 6-of-18 property sectors in positive territory. Mortgage REITs slipped 0.3%.

  • Medical Properties Trust (MPW) - one of the most heavily-shorted REITs - surged nearly 10% after its largest tenant - Steward Health Care - completed the extension of its credit deal with its lenders through December 2023.

  • A pair of hotel REITs - Park Hotels (PK) and Ryman Hospitality (RHP) - provided encouraging business updates that pushed back on concern over waning travel demand. TSA data shows that December is on-pace to be the strongest month of travel since the pandemic.

 

Income Builder Daily Recap

U.S. equity markets finished broadly lower Thursday after the Senate passed of a massive $1.7 trillion federal spending bill while stronger-than-expected jobless claims data raised questions over the outlook for waning inflation. Erasing its gains on the week and trading back at its lowest levels since early November, the S&P 500 slipped 1.5% today while the tech-heavy Nasdaq 100 dipped 2.5% - declining in six-of-seven trading sessions. Real estate equities were among the better performers today with the Equity REIT Index finishing off by 0.4% today with 6-of-18 property sectors in positive territory, while the Mortgage REIT Index slipped 0.3%.

The 'good news is bad news' theme was back today as stronger-than-expected jobless claims data and an upward revision to third-quarter GDP kept upward pressure on the short end of the yield curve with the 2-Year Treasury Yield (US2Y) rising 6 basis points to 4.28% while longer-term rates pulled back with the 10-Year Treasury Yield (US10Y) finished lower by 2 basis points to 3.67%. Homebuilders were a bright spot today, however, after Freddie Mac reported that mortgage rates dropped for the sixth straight week with the average 30-Year Fixed Mortgage Rate declining to 6.27% from 6.31% the week prior, according to Freddie Mac. Mortgage rates have dipped more than 80 basis points from their highs last month - bringing some buyers back into the fold - but mortgage rates are still double that of early 2022.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector


Healthcare: Medical Properties Trust (MPW) - which we own the REIT Focused Income Portfolio - surged nearly 10% after its largest tenant - Steward Health Care - completed the extension of its credit deal with its lenders through December 2023. MPW has become a fiercely contested “battleground stock” in recent months after coming into the cross-hairs of several vocal short-selling firms, which have focused their critique on the financial health and complex relationship between MPW and Steward and the border pressure on hospital operators this year. Steward Chairman and CEO Ralph de la Torre commented, "The extension of our ABL coupled with our reengineered structure position us extraordinarily well for the coming year."

Hotels: Park Hotels (PK) advanced 1.5% today after providing a business update which noted that its Revenue Per Available Room ("RevPAR") in October was 9.7% below 2019-levels while November RevPAR was 10.9% below 2019-levels. PK also raised its Q4 FFO outlook citing "higher than expected group business yielding additional incremental food & beverage revenue, offset by weaker than expected leisure demand in certain resort markets." Ryman Hospitality (RHP) advanced 0.6% after reporting that its October RevPAR was 6.2% above 2019-levels while its November RevPAR was 14.9% above 2019-levels while noting that its results are "trending toward the top end of our full year guidance range.” TSA checkpoint data updated this morning shows that domestic throughput climbed to 96% of 2019-levels thus far in December - the highest since the start of the pandemic.


Additional Headlines from The Daily REITBeat on Income Builder

  • Necessity Retail (RTL) announced that it closed on four property sales for $1.6M and it expects to close on four additional property sales for $72.8M in Q4. The REIT will have sold 27 properties for a total contract sales price of $405.4M for the year ended December 31, including four properties expected to close by 2022-end.

  • Income Builder Members receive access to The Daily REITBeat, an institutional-quality daily note that keeps subscribers apprised of pertinent news, data, and trends specifically within the REIT industry

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mostly-lower today with residential mREITs slipping 0.2% while commercial mREITs declined 1.9%. Western Asset Mortgage (WMC) rallied more than 5% after holding its quarterly dividend steady at $0.40/share, representing a dividend yield of 18.6%. ACRES Realty (ACR) dipped nearly 20% after it declared its preferred dividend but kept its common stock dividend suspended. ACR has not paid a common dividend since 2019 - one of just two mortgage REITs that does not currently pay a dividend.

Economic Data This Week

The busy week of economic data concludes on Friday with New Home Sales data which is expected to stay around the 600k level - a more modest decline compared to existing home sales seen this week - as homebuilders have generally been more proactively adjusted prices than existing owners. On Friday, we'll also see some important inflation data with the PCE Price Index for November - the Fed's preferred gauge of inflation - which is expected to show a moderation in price pressures to the lowest since late 2021.

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.

Hoya Capital Research & Index Innovations (“Hoya Capital”) is an affiliate of Hoya Capital Real Estate, a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations provides non-advisory services including market commentary, research, and index administration focused on publicly traded securities in the real estate industry.


This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital Real Estate. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.


The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.


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