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Amazon Saves Malls? | Stimulus Stalemate | Earnings Wrap

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Summary

  • U.S. equity markets gained for the seventh-straight day Monday after the White House took executive action amid the stimulus stalemate as encouraging coronavirus data pulled cautious investors back into the market.
  • Following gains of 2.5% last week, the S&P 500 finished higher by 0.3% - closing within 2% of all-time highs - while the Dow Jones Industrial Average jumped 360 points.
  • After gaining 1.2% last week, the Equity REIT ETF (VNQ) finished higher by 0.2% today with 13 of 18 property sectors in positive territory. The Mortgage REIT ETF (REM) gained 2.8%.
  • We're now in the home stretch of real estate earnings season which concludes this week with the final 11 equity REITs reporting results. Results thus far have trended better-than-expected.
  • Simon Property jumped more than 5% today following reports that the company is in talks with Amazon to turn vacated department stores into distribution centers. SPG reported results after the close today, noting improving rent collection.

Real Estate Daily Recap

Our Real Estate Daily Recap discusses the notable news and events in the real estate sector over the last trading day and highlights sector-by-sector performance. We publish this note every afternoon at HoyaCapital.com and occasionally on Seeking Alpha to cover significant news and events. Subscribe to our free mailing list to make sure you never miss the latest developments in the commercial and residential real estate sectors. You can also follow our real-time commentary on Twitter and LinkedIn.

U.S. equity markets gained for the seventh-straight day Monday after the White House took executive action amid the stimulus stalemate while encouraging coronavirus data pulled cautious investors back into the market. Following gains of 2.5% last week, the S&P 500 ETF (SPY) finished higher by 0.3% - back within 2% of all-time highs - while the Dow Jones Industrial Average (DJI) jumped 360 points. After gaining 1.2% last week, the Equity REIT ETF (VNQ) finished higher by 0.2% today with 13 of 18 property sectors in positive territory. The Mortgage REIT ETF (REM), meanwhile, gained 2.8% today following gains of 2.1% last week.

real estate etf

As discussed in our Real Estate Weekly Outlook, last week's encouraging slate of employment data quelled concerns about a potentially ebbing economic recovery while coronavirus data has shown that daily case counts and hospitalizations in the United States continue to trend downward after a sharp reacceleration in June and early July. 6 of the 11 GICS equity sectors finished higher on the day led by the economically-sensitive Energy (XLE), Industrials (XLI), and Consumer Discretionary (XLY) sectors. Homebuilders led the Hoya Capital Housing Index to another day of gains as the steady resilience in the U.S. housing market continues to underlay the economic rebound over the last several months.

ETF investing

After a frenetic slate of employment data and corporate earnings reports, the economic calendar slows down just a bit this week, highlighted by inflation and retail sales data. On Tuesday, we'll see Producer Price Index data, and on Wednesday, we'll see Consumer Price Index data for July with both expected to show continued downward price pressure. On Friday, we'll see Retail Sales data for July with expectations of a 1.8% month-over-month increase after last week's strong 7.5% growth, as consumer spending has been buoyed over the last four months by WWII-levels of fiscal stimulus. Jobless claims data will also continue to be a focus as investors look for signs that the encouraging decline in Initial Claims can be sustained in the months ahead.

real estate economic data

Commercial Equity REITs

We're now in the home stretch of real estate earnings season which concludes this week with the final 11 equity REITs reporting results. Last week, we published Who Paid the Rent: Earnings Halftime Report. Results thus far have generally been better than expected with nearly a dozen REITs boosting guidance. After 59 equity REITs and 30 mortgage REITs announced a dividend cut in March through June, just two additional REITs have announced a reduction since the start of July. We'll have full coverage of this afternoon's results on iREIT on Alpha throughout the evening.

REIT earnings

Malls: Simon Property (SPG) jumped more than 5% today following reports that the company is in talks with Amazon (AMZN) to turn vacated department stores into distribution centers. This afternoon, SPG reported Q2 results, noting that same-store NOI plunged 18.5% while noting that it collected 51% of rents in May and April, 69% in June, and 73% in July which includes "de minimus deferrals." As of Aug. 7, 91% of the tenants across the SPG's U.S. retail properties were open and operating. We're expecting to hear results this afternoon from Pennsylvania REIT (PEI) and Taubman Centers (TCO). We'll be listening-in to SPG's earnings call for comments on dividend plans for the rest of 2020. SPG reduced their distributions last quarter from $2.10 to $1.30 but left the door open for adjustments in Q3 and Q4.

real estate dividend cuts 2020

Hotel & Lodging: Southerly Hotels (SOHO) gained 3.3% after announcing earnings this morning despite reporting a dismal occupancy rate of 12.1% in Q2 compared to 76.2% last year, driving a plunge in RevPAR to just $14.29 per room from $118.62 a year ago. The hotel REIT commented, however, that it sees signs of demand returning, particularly in the leisure segment. The "reopening-sensitive" hotel sector jumped last week - and today - on signs of waning coronavirus case counts and after rumors reported by Seeking Alpha that Blackstone (BX) may be interested in acquiring one or more hotel REITs with Host Hotels (HST) named as a possible target. This afternoon, we'll hear results from CorePoint Lodging (CPLG).

hotel occupancy

Apartments: The National Multifamily Housing Council reported today that its Rent Payment Tracker found 79.3% of apartment households made a full or partial rent payment by August 6, a mild 1.9 percentage-point decrease from the same period last year. Throughout the pandemic, apartment REITs have reported rent collection results far above the industry average, a function of their modest exposure to lower-rent housing units. Bluerock Residential (BRG) dipped 1.8% after announcing results this morning, reporting rent collection of 97% in Q2 and 97% in July, roughly in-line with their apartment REIT peers. Q2 same-store revenue fell 0.4% and same-store net operating income declined 1.1% year-over-year while occupancy rose 130 basis points from last year to 95.3%. This afternoon, we also heard results from micro-cap apartment REITs BRT Apartments (BRT) and Clipper Realty (CLPR).

apartments 2020 12Elsewhere in the REIT sector, we'll also hear results this afternoon from healthcare REIT National Health Investors (NHI), technology REIT Unit Group (UNIT), and shopping center REIT Cedar Realty (CDR). Rent collection has remained largely a non-factor for the "essential" property sectors with collection rates averaging over 95% while retail REITs have noted a steady and sequential improvement since April.

rent collectionMortgage REITs

As tracked in our Mortgage REIT Tracker available to iREIT on Alpha subscribers, residential mREITs finished higher by 3.0% today after gaining 2.5% last week while commercial mREITs finished higher by 2.8% today after ending last week higher by 5.2%. AG Mortgage (MITT) jumped 6.0% today after reporting results this morning, noting a recovery in its book value per share to $2.75 compared to an estimated range of $1.80 to $1.90 at April 30, 2020 and $2.63 as of March 31, 2020. Sachem Capital (SACH) gained 2.8% after reporting generally in-line results this morning while Hunt Companies (HCFT) gained 3.9% after reporting results last Friday afternoon. This afternoon, we'll hear from Broadmark Realty (BRMK), Cherry Hill (CHIM), and Granite Pointe (GPMT) which we'll discuss in tomorrow's report.

mortgage REITs

Last week, we published our mREIT Earnings Preview - Mortgage REITs: Back From the Brink. Few asset classes have been slammed harder by the pandemic than Mortgage REITs, which have seen a "dividend cut bloodbath" with 33 of 42 mREITs suspending or reducing their dividends. We discussed the three trends that we're watching this earnings season: 1) Dividend Cuts and Resumptions; 2) Updated Book Value Estimates, and 3) Macroeconomic Commentary on the Mortgage and Housing Markets. mREIT earnings preview

REIT Preferreds & Bonds

As tracked in our all-new REIT Preferred Stock & Bond Tracker available to iREIT on Alpha subscribers, REIT Preferred stocks finished higher by 2.1% today, on average, but underperformed their respective common stock issues by an average of 0.7%. Among REITs that offer preferred shares, the performance of these securities has been an average of 16.7% higher in 2020 than their respective common shares. Preferred stocks generally offer more downside protection, but in exchange, these securities offer relatively limited upside potential outside of the limited number of “participating” preferred offerings that can be converted into common shares.

REIT preferreds

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hoya capital real estate research

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.

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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