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  • Alex Pettee, CFA

REIT Earnings • Strong Jobs Data • Dividend Boost

Summary

  • U.S. equity markets rallied Thursday ahead of tomorrow's jobs report following a generally positive slate of corporate earnings reports and jobless claims data showing continued improvement in U.S. labor markets.

  • Climbing back into positive territory for the week, the S&P 500 finished higher by 0.8% while the Mid-Cap 400 gained 0.5% and the Small-Cap 600 climbed 0.6%.

  • Real estate equities were mostly higher today amid the busiest 24-hours of REIT earnings reports. The broad-based Equity REIT Index finished higher by 0.6% with 14-of-19 property sectors in positive-territory.

  • Initial Jobless Claims retreated to the lowest level since the start of the pandemic last week as the historically swift rebound in labor markets now has many businesses reporting difficulty finding workers.

  • Shopping center REIT Federal Realty (FR) and cannabis REIT Innovative Industrial (IIPR) were positive earnings standouts while Plymouth (PLYM) became the 53rd REIT to raise its dividend this year.

Real Estate Daily Recap

U.S. equity markets rallied Thursday ahead of tomorrow's jobs report following a generally positive slate of corporate earnings reports and jobless claims data showing continued improvement in U.S. labor markets. Climbing back into positive territory for the week, the S&P 500 ETF (SPY) finished higher by 0.8% while the Mid-Cap 400 (MDY) gained 0.5% and the Small-Cap 600 (SLY) climbed 0.6%. Real estate equities were mostly higher today amid the busiest 24-hours of REIT earnings reports. The broad-based Equity REIT ETFs (VNQ) finished higher by 0.6% with 14-of-19 property sectors in positive territory while Mortgage REITs (REM) declined by 0.9%.

Initial Jobless Claims retreated to the lowest level since the start of the pandemic last week as the historically swift rebound in labor markets now has many businesses reporting difficulty finding workers. All eleven GICS equity sectors finished on the upside today, led by the Financials (XLF), Consumer Staples (XLP), and Communications (XLC) sectors. Strong gains from the home furnishings and home improvement sectors lifted the Hoya Capital Housing Index to the upside as well today after home goods retail At Home (HOME) agreed to be taken private and ahead of earnings reports this afternoon from single-family rental REIT American Homes (AMH).

Commercial Equity REITs

Yesterday, we published our REIT Earnings Halftime Report. The major themes this quarter have been "Beat and Boost" and the revival of long-dormant "Animal Spirits." Nearly 90% of REITs have topped consensus earnings estimates. Of the 71 REITs and homebuilders that provide full-year guidance, nearly two-thirds have raised their full-year estimates. Positive surprises thus far in Q1 have been primarily in the residential REIT sectors where self-storage, manufactured housing, and sunbelt-focused apartment REITs have reported stellar results. Below is the updated Earnings Scorecard.

Cannabis: Innovative Industrial (IIPR) gained 4% today after reporting another strong quarter of growth. IIPR recorded year-over-year AFFO growth of more than 31% driven by a 103% jump in revenues. IIPR has acquired four additional properties so far in 2021, bring its total to 69 properties, representing roughly 6 million square feet which are 100% leased with an average remaining lease term of approximately 17 years. The emerging Cannabis REIT sector has been far and away the best-performing property sector since the start of 2019, soaring more than 150% in 2020 following 70% gains the prior year. The ongoing federal prohibition - and the resulting limit on access to traditional banking - has forced cultivators and retailers to turn to alternative sources for capital, including cannabis REITs.

Net Lease: EPR Properties (EPR) - which focuses on movie theaters and other experience-oriented properties - gained about 1% after reporting that rent collection improved to 72% in Q1 - up from the trough of 28% in 2Q20. Spirit Realty (SRC) finished modestly higher after boosting its full-year guidance which now calls for AFFO growth of 5.1%, up from its prior outlook of 3.4%. Store Capital (STOR) finished modestly lower after reporting collection of 93% of rents in Q1 and affirming its full-year outlook which calls for AFFO growth of 5.5%. American Finance (AFIN) and Global Net Lease (GNL) were both slightly lower despite reporting perfect rent collection in Q1.

Mall: Pennsylvania REIT (PEI) dipped nearly 3% today after reporting that it collected just 81% of billed first quarter 2021 rents, an increase from receipts of 73% and 61% of billed rents as of the end of each of the Q4 and Q3. PEI did see improving foot traffic at its malls which reached 86% of pre-COVID levels in April. Tanger Outlets (SKT) declined 1% after reporting results that were generally in line with expectations with same-store NOI growth of -8.0%. SKT reported that rent collections improved to 95% in Q1 and reaffirmed its full-year Core FFO guidance which calls for a decline of -5.7% this year at the midpoint.

Shopping Center: Federal Realty (FRT) jumped more than 3% after initiating guidance, seeing full-year FFO growth of 5.5%. FRT noted that it collected 90% of rents in Q1 and saw a modest sequential improvement in same-store NOI growth. RPT Realty (RPT) was roughly flat today despite reporting that it collected 95% of rents in Q1 and boosted its full-year NOI growth outlook to 9.0%, up from its prior outlook of 5.1%. We'll hear results from Regency Centers (REG) and Cedar Realty (CDR) after the bell today.

Healthcare: Diversified Healthcare (DHC) dipped more than 7% after reporting that its same-store NOI declined 40.6% in Q1 driven by a 91% plunge in its senior housing operating NOI which was partially offset by a more modest 3.1% decline in its medical office NOI. Healthcare Realty (HR) finished slightly higher after the MOB-focused REIT reporting same-store NOI growth of 2.1% Sabra Healthcare (SBRA) gained about 1% after reporting a 3.4% decline in total portfolio NOI as declines in its senior housing operating portfolio was offset by relative strength in its senior housing triple-net portfolio. We'll hear results from Healthcare Trust of America (HTA) and Caretrust (CTRE) after the bell today.

Industrial: Terreno (TRNO) jumped nearly 2% today after reporting strong results with same-store NOI growth of 7.3% in Q1 and reported that cash leasing spreads increased 16% from last year. Separately, Plymouth (PLYM) became the 53rd REIT to raise its dividend this year with a 5% boost. All five of the industrial REITs that provide full-year NOI guidance raised their outlook as demand for industrial real estate space remains insatiable as businesses scramble to invest in logistics resiliency. Americold (COLD) reports results after the bell today while Plymouth (PLYM) and Lexington (LXP) report tomorrow morning.

In addition to the aforementioned reports, we'll also hear results this afternoon from manufactured housing REIT UMH Properties (UMH), hotel REITs Park Hotels (PK), Apple Hospitality (APLE), CorePoint (CPLG), and Diamondrock (DRH), timber REIT Catchmark (CTT), and office REIT Mack-Cali (CLI).

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 0.9% today and are now off by 0.8% this week. Commercial mREITs finished higher by 0.3% but remain lower by 0.6% this week. Two Harbors (TWO) dipped more than 12% today after reporting disappointing results with a decline in its Book Value Per Share ("BVPS") of 4.5% in Q1. Invesco Mortgage (IVR) declined by nearly 5% after reporting a 5.4% decline in its BVPS for the quarter. Residential mREITs have reported an average increase in Book Value Per Share ("BVPS") of about 2% this quarter while the reported BVPS for commercial mREITs has been flat.

REIT Preferreds & Bonds

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished lower by 0.22% today, on average, but outperformed their respective common stock issues by an average of 0.59%. So far in 2021, REIT Preferred stocks are higher by 7.08% on a price return basis. The average REIT preferred currently pays a dividend yield of 6.27% and trades at a slight premium to par value.

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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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