REIT Dividend Hike • M&A Rejection • Consumer Concern
U.S. equity markets finished modestly lower Tuesday - but still notched their seventh-straight monthly advance - as investors assessed the fallout from the Afghanistan withdrawal and data showing slumping consumer confidence.
Ending the month with gains of roughly 3.1%, the S&P 500 declined by 0.1% today while the Mid-Cap 400 slipped 0.3% and the Small-Cap 600 gained 0.1%.
Real estate equities led the way again today with the Equity REIT Index gaining 0.5% on the day with 15 of 19 property sectors in positive territory.
Apartment REIT Centerspace (CSR) became the 101st REIT to raise its dividend this year, declaring a $0.72/share quarterly dividend, a 2.9% increase from its prior dividend of $0.70.
Monmouth Real Estate (MNR) announced that preliminary figures show that the proposal to be acquired by Equity Commonwealth (EQC) didn't get receive enough shareholder votes to approve the deal.
Real Estate Daily Recap
U.S. equity markets finished modestly lower Tuesday - but still notched their seventh-straight monthly advance - as investors assessed the impacts of the Afghanistan withdrawal and data showing a slump in consumer confidence ahead of employment data later this week. Ending the month with gains of roughly 3.1%, the S&P 500 declined by 0.1% today while the Mid-Cap 400 slipped 0.3% and the Small-Cap 600 gained 0.1%. Real estate equities led the way again today with the Equity REIT Index gaining 0.5% on the day with 15 of 19 property sectors in positive territory while Mortgage REITs advanced 0.4%.
The "fourth wave" of COVID, anxieties over soaring inflation, and recent geopolitical concerns have taken a toll on consumer confidence in recent weeks as fresh data today from the Conference Board showed that its confidence index dipped sharply in August to six-month lows. Seven of the eleven GICS equity sectors finished lower on the day, dragged on the downside by the Energy (XLE) and Technology (XLK) sectors. With today's outperformance, Commercial Real Estate (XLRE) is now the best-performing GICS equity sector this year among the 11 SPDR sector ETFs.
Apartments: Centerspace (CSR) became the 101st REIT to raise its dividend this year, declaring a $0.72/share quarterly dividend, a 2.9% increase from its prior dividend of $0.70. Last weekend, we published 100 REIT Dividend Hikes. Following the wave of pandemic-driven dividend cuts across the REIT sector last year, we've seen a similarly powerful wave of dividend increases this year, passing the century mark last week with six additional hikes. REIT company-level metrics have exhibited a substantial rebound over the last year as FFO and dividends per share have now fully recovered the sharp declines from early in the pandemic.
Casinos: Today, we published New King of Vegas which discussed the mega-merger between VICI Properties (VICI) and MGP Properties (MGP) and analyzed recent fundamental performance of the casino REIT sector. The merger will give the combined firm a dominant competitive position in the critical Las Vegas market and appears to be a win-win for both VICI and MGP shareholders. Despite their strong returns since emerging in the mid-2010s and steady performance throughout the pandemic, casino REITs have traded at persistent discounts relative to their net lease REIT peers. With an average dividend yield above 5%, we view casino REITs as a more compelling - and perhaps "under the radar" - alternative to other seemingly "cheap" sectors facing stiffer secular headwinds.
Industrial: On the topic of REIT M&A, Monmouth Real Estate (MNR) gained 0.5% today after it announced that preliminary figures show that the deal to be acquired by Equity Commonwealth (EQC) didn't get enough votes to approve the deal from MNR holders, according to a Bloomberg report. Last week, proxy advisory firm Glass Lewis joined fellow proxy advisor ISS in recommending that shareholders reject the proposed acquisition of Monmouth by Equity Residential and instead "pursue Starwood’s competing offer" of $19.20 net cash per share, and suggested that the Board's decision to reject the offer was not in the best interest of its shareholders.
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 0.6% today but remain lower by 0.2% on the week. Commercial mREITs gained 0.5% today and are now higher by 0.5% this week. On a slow day of newsflow, Great Ajax (AJX) and ACRE Realty (ACR) were leaders on the upside while Capstead Mortgage (CMO) was the laggard. The average residential mREIT pays a dividend yield of 8.9% while the average commercial mREIT pays a dividend yield of 6.7%.
REIT Preferreds & Capital Raising
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished fractionally lower today, on average, and underperformed their respective common stock issues by an average of 0.89%. So far in 2021, REIT Preferred stocks are higher by 10.94% on a price return basis. The average REIT preferred pays a current yield of 5.87% and trades at a slight premium to par value.
Economic Data This Week
We have another busy slate of economic and housing data in the week ahead, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of 728k in August, a slowdown from the 943k rate of job growth in July while the unemployment rate is expected to tick down to 5.2%. We'll also see Construction Spending data on Wednesday, as well as a flurry of Purchasing Managers Index ("PMI") data throughout the week.
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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.