• Alex Pettee, CFA

Tech Rebound • REITs Gain • Fake Bankruptcy Tweet?

Summary

  • U.S. equity markets finished broadly higher Tuesday, driven by a rebound in large-cap technology stocks, as long-term interest rates retreated ahead of a closely-watched slate of inflation data tomorrow morning.

  • Following declines of 0.5% yesterday, the S&P 500 finished higher by 1.4% while the tech-heavy Nasdaq 100 surged nearly 4% after dipping into "correction territory" yesterday.

  • Real estate equities were mixed today as investors rotated back into the "essential" property sectors, driving the broad-based Equity REIT ETFs higher by 0.7% with 12-of-19 property sectors in positive-territory.

  • Today marked the unofficial anniversary of the "Black Monday" coronavirus stock market "crash" which saw the Dow Jones plunge more than 2,000 points for the first time in history.

  • Washington Prime Group (WPG) - which Bloomberg reported is preparing to file for Chapter 11 - surged nearly 90% today after a bizarre "fake tweet" claimed that the firm is "revoking their Bankruptcy filing."

Real Estate Daily Recap

U.S. equity markets finished broadly higher Tuesday, driven by a rebound in large-cap technology stocks, as long-term interest rates retreated ahead of a closely-watched slate of inflation data tomorrow morning. Following declines of 0.5% yesterday, the S&P 500 ETF (SPY) finished higher by 1.4% while the tech-heavy Nasdaq 100 (QQQ) surged nearly 4% after dipping into "correction territory" yesterday. Real estate equities were mixed today as investors rotated back into the "essential" property sectors, driving the broad-based Equity REIT ETFs (VNQ) higher by 0.7% with 12-of-19 property sectors in positive territory while the Mortgage REITs (REM) gained 0.2%.

Today marked the unofficial anniversary of the "Black Monday" coronavirus stock market "crash" which saw the Dow Jones plunge more than 2,000 points for the first time in history. Trading patterns today saw a one-day reversion of the "reopening trade" as the economically-sensitive GICS equity sectors including Energy (XLE) and Financials (XLF) lagged while the 10-Year Treasury Yield (IEF) pulled-back by 5 basis points to close at 1.55% after closing at the highest level in over a year yesterday. A strong day from the Property Technology segment lifted the Hoya Capital Housing Index to another day of gains led by Zillow (Z) and Redfin (RDFN).

Commercial Equity REITs

As discussed in Dividends Raised, Rents Paid: REIT Earnings Recap, whether it's the "reopening trade" or the "Rates Up, REITs Down" phenomenon, our analysis shows that macro-driven phenomena tend to result in exaggerated near-term price moves in individual REITs and property sectors which are often not warranted by micro-level fundamentals. As the post-vaccine rotation has narrowed the valuation gap between the higher-quality and lower-quality REITs, we see a compelling case for bolstering one's positioning in the "essential" property sectors like housing and technology that are delivering superior growth rates - which becomes particularly important if we do indeed see sustained inflationary pressure.


Malls: Washington Prime Group (WPG) - which is reportedly poised to join Pennsylvania REIT (PEI) and CBL & Associates (CBL) as the third mall REIT in the past year to declare bankruptcy - surged nearly 90% today after a bizarre "fake tweet" claimed that the firm is "revoking their Bankruptcy filing." The tweet - a screenshot appearing to be a Bloomberg article - was not a real article published by the news network. Regardless, we're still waiting on earnings results from these three REITs which are expected to show a historic plunge in FFO, NOI, and occupancy rates throughout 2020, the higher-productivity mall REITs - Simon Property (SPG) and Macerich (MAC) - have caught a bid this year as rent collection trended towards 90% in Q4.

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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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