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  • Alex Pettee, CFA

REIT Dividend Hike • Data Center Deal • Inflation Week

  • U.S. equity markets finished broadly lower Monday- erasing most of last week's gains- ahead of a critical week of inflation data that will have significant implications for interest rate hikes.

  • Following gains of 1.9% last week, the S&P 500 retreated 1.2% today while the tech-heavy Nasdaq 100 dipped 2.1% following gains of nearly 5% last week.

  • Real estate equities were among the stronger performers today as benchmark interest rates moderated. The Equity REIT Index finished lower by 0.2% today with 5-of-18 REIT sectors in positive territory.

  • Mortgage REIT Sachem Capital (SACH) rallied nearly 7% today after it hiked its quarterly dividend by 17% to $0.14 per share, representing a forward yield of 13.1%.

  • American Tower (AMT) was among the strongest performers today after it announced that it sold a 29% state in its data center business for $2.5B to Stonepeak, an alternative investment firm.

Income Builder Daily Recap

U.S. equity markets finished broadly lower Monday - erasing most of last week's gains - ahead of a critical week of inflation data that will have significant implications for the path of Federal Reserve rate hikes. Following gains of 1.9% last week, the S&P 500 retreated 1.2% today while the tech-heavy Nasdaq 100 dipped 2.1% following gains of nearly 5% last week. Real estate equities were among the stronger performers today as benchmark interest rates moderated. The Equity REIT Index finished lower by 0.2% today with 5 of 18 REIT sectors in positive territory while the Mortgage REIT Index slipped 1.1% following strong gains last week.

Global benchmark interest rates retreated today ahead of key inflation data later in the week which investors - and the Fed - are hoping will finally show signs of peaking price pressures. The 10-Year Treasury Yield dipped back below the 3.0% level - down 11 basis points on the day - and well below its recent high of 3.50% reached in early June. Mounting concerns over slowing economic growth in Europe and Asia pushed the U.S. Dollar Index to the strongest level in over twenty years. Ten of the eleven GICS equity sectors finished lower on the day, dragged on the downside by the Communications (XLC) sector which was pressured by an 11% dive in Twitter (TWTR) after Elon Musk withdrew his takeover bid citing concerns over bots on the platform.

Inflation data highlight another busy week of economic data in the week ahead. On Wednesday, the BLS will report the Consumer Price Index. The Core CPI is expected to moderate for the third straight month to a 5.7% annual rate, but persistent energy and food price inflation is expected to keep the headline rate to the highest since December 1981. The following day we'll see the Producer Price Index for June which is expected to exhibit similar trends of peaking price pressures. On Friday, we'll also see Retail Sales for June and get our first look at Michigan Consumer Sentiment for July. Last month, sentiment fell to the lowest level in more than 10 years as persistent inflation and worries over economic growth have weighed on confidence.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector


Cell Tower: American Tower (AMT) advanced 1.2% today after it announced that it sold a 29% state in its data center business for $2.5B to Stonepeak, an alternative investment firm. AMT's data center business is primarily comprised of its interests in CoreSite, which it acquired last year for $10B and consists of 27 data centers in 10 U.S. markets. Under the terms of the deal - which is expected to close in the third quarter - American Tower will retain managerial and operational control, as well as day-to-day oversight of its U.S. data center business, and Stonepeak will obtain certain governance rights. Strategically-located network-dense data centers have been a recent focus for cell tower REITs amid a push to build out "Edge" network capabilities - the concept that many cell tower sites will soon be hosting “mini data centers” on the "edge" of communications networks in order to reduce latency for ultra-time-sensitive applications like self-driving vehicles.

Shopping Center: Necessity Retail (RTL) - formerly known as American Finance Trust - announced that it completed the final acquisition from the previously announced agreement to acquire a portfolio of 81 shopping centers from CIM Real Estate for $1.3 billion. The Company also announced that year-to-date it has acquired 93 properties for a total of $1.4 billion. The acquired properties total 10.2 million square feet and were acquired at a cash cap rate of 7.2%. With the completed acquisitions, multi-tenant shopping center properties now comprise the majority of its portfolio as it shifts away from its previous focus on single-tenant net lease properties. As we discussed in Winning The Last Mile, shopping center fundamentals are now as strong – if not stronger than before the pandemic. Occupancy rates climbed to the highest level since early 2015 while rental rates continue to accelerate.

Hotels: Last Friday we published Hotel REITs: Summer of Revenge Travel. 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.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mostly lower today with residential mREITs declining 1.0% while commercial mREITs declined 0.9%. Sachem Capital (SACH) rallied nearly 7% today after it hiked its quarterly dividend by 17% to $0.14 per share, representing a forward yield of 13.1%. SACH becomes the 12th mortgage REIT to raise its dividend this year while four mREITs have lowered their dividends. After the close today, AGNC Investment (AGNC) held its monthly dividend steady at $0.12/share, representing a forward yield of 12.7%. The average residential mREIT now pays a dividend yield of roughly 13.3% while the average commercial mREIT pays a dividend yield of 9.2%.

REIT Preferreds & Capital Raising

Per the Income Builder Preferred Tracker available to Income Builder subscribers, REIT Preferred stocks finished higher by 1.11% 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 6.97%.

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.


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