Mall Survival • IPO Froth • Vaccine Approval Imminent

Dec. 11, 2020 4:33 PM ETThe Hoya Capital Housing ETF (HOMZ), ITB, VNQ, XHBAAIC, AAIC.PR.B, AAIC.PR.C, AAPL, AAT, ABNB, ABR, ABR.PA, ABR.PB, ABR.PC, ABT, BX, ACRE, ADC, AEO, RTL, GNL.PR.D, AGNC, AGNCM, AGNCN, AGNCO, AGNCP, AHH, AHH.PR.A, AHT, AHT.PR.D, AHT.PR.F, AHT.PR.G, AHT.PR.H, AHT.PR.I, AIC, AIV, AIW, AJX, AJXA, AKR, ALEX, AMC, AMH, AMH.PD, AMH.PE, AMH.PF, AMH.PR.G, AMH.PR.H, AMT, AMWD, AMZN, ANF, APLE, APPL, ARI, ARR, ARR.PR.C, AVB, AWI, AWP, AZN, AZNCF, BA, BAC, BAC.PA, BAC.PR.B, BAC.PC, BAC.PR.E, BAC.PR.K, BAC.PR.L, BAC.PR.M, BAC.PR.N, BACRP, BALY, BAM, BAMGF, BAMKF, BDN, BHR, BHR.PR.B, BHR.PR.D, BK, BK.PC, BKFPF, BKI, BLK, BML.PR.G, BML.PR.H, BML.PR.J, BML.PR.L, BNL, BNTX, BPY, BPYPN, BPYPO, BPYPP, BPYU, BPYUP, BRG, BRG.PA, BRG.PC, BRG.PD, RC, BRT, BRX, BXMT, BXP, BXP.PB, BYD, C, C.PR.K, CCI, CCI.PA, CHCT, CHDN, CHIM, CHMI, CHMI.PR.A, CHMI.PR.B, CIM, CIM.PR.A, CIM.PR.B, CIM.PR.C, CIM.PR.D, CIO, CIO.PR.A, DWAY, CLDT, VRE, BRSP, DBRG, DBRG.PG, DBRG.PR.H, DBRG.PR.I, CLPR, FBRT.PR.E, CNLC, CNTY, COLD, CONE, COST, CPI, CPLG, CPRJ, CPT, CRM, CTRE, PCH, CUBE, CUZ, CVCO, CXW, CZR, DASH, DEA, DEI, DHC, DHI, DJI, DLR, DLR.PC, DLR.PG, DLR.PI, DLR.PR.J, DLR.PR.K, DLR.PR.L, DOC, PLD, DRH, DRH.PR.A, DX, DX.PB, DX.PR.C, EARN, EFC, EFC.PR.A, EGP, EPR.PR.C, EPR.PR.E, EPR.PR.G, EPRT, EQC, EQC.PR.D, EQIX, EQR, ERI, ESRT, EXR, META, FMCC, FMCCG, FMCCH, FMCCI, FMCCK, FMCCL, FMCCM, FMCCN, FMCCO, FMCCP, FMCKI, FMCKJ, FMCKK, FMCKL, FMCKM1 Comment

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Summary

U.S. equity markets finished mixed Friday, ending the week with modest declines ahead of the expected FDA approval of the first COVID vaccine, while stimulus talks remain stuck in neutral.
Ending the week lower by 1.0%, the S&P 500 finished lower by 0.1% today while the Dow Jones Industrial Average gained 47 points. Small-Caps hung onto gains for the week.
Real estate equities were mixed on the day but were among the laggards this week. The broad-based Equity REIT ETF declined by 0.1% today and roughly 2% on the week.
Troubled mall owner Pennsylvania REIT (PEI) jumped 13.1% today after announcing that it has emerged from Chapter 11 bankruptcy proceedings, the first step of many towards stabilization.
Four more equity REITs boosted their dividends this week. We'll have a full analysis of REIT Dividend Season and this week's price action in our Real Estate Weekly Recap published tomorrow morning.

Real Estate Daily Recap

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U.S. equity markets finished mixed Friday, ending the week with modest declines ahead of the expected FDA approval of the first COVID vaccine in the United States within hours while the long-stalled fiscal stimulus renewal remains seemingly stuck in neutral. Ending the week lower by 1.0%, the S&P 500 ETF (SPY) finished lower by 0.1% today while the Dow Jones Industrial Average (DIA) gained 47 points. Real estate equities were mixed on the day, but were generally among the laggards this week. The broad-based Equity REIT ETF (VNQ) declined by 0.1% today with 12 of the 18 property sectors in positive territory. The Mortgage REIT ETF (REM) declined 0.4% on the day.

Concerns of froth in equity markets have become more apparent over the past week amid an IPO frenzy with Airbnb (ABNB) and DoorDash (DASH) surging in their public market debuts this week. Optimism about forthcoming vaccines from Pfizer (PFE) and Moderna (MRNA) have been offset by the ongoing intensification of the coronavirus outbreak, underscored by the shutdown of indoor dining in NYC today. 7 of the 11 GICS equity sectors finished in negative territory on the day while just one sector - Energy (XLE) - recorded gains for the week. We'll have a full analysis of this week's price action in our Real Estate Weekly Recap published tomorrow morning.

Commercial Equity REITs

Today, we published Data Center REITs: Cloud is Getting Crowded. The vaccine-driven sector rotation within the REIT sector has further pressured these "work from home winners," which have pulled back about 10% this past month and are nearly 20% below recent-highs. Risks remain as intense competition from the hyperscale giants – Amazon, Microsoft, and Google - and relentless supply growth have pressured pricing power and AFFO growth. Responding to the mounting competitive threats, data center operators have turned to M&A to regain some degree of pricing power, with a particular focus on the higher-value interconnection-focused facilities.

Malls: Troubled mall owner Pennsylvania REIT (PEI) jumped 13.1% today after announcing that it has emerged from Chapter 11 bankruptcy proceedings, the first step of many towards stabilization for the mall REIT which, despite today's rebound, has lost roughly 80% of its value in 2020 and 95% over the past 5 years. Temporary and permanent store closings and anemic rent collection resulted in a decline in same-store NOI growth of nearly 30% in Q3 for the lower-tier mall REITs, while FFO per share has plunged a mind-numbing 70% through the first nine months of 2020.

It's been another busy week of dividend news across the REIT sector as discussed in 'Tis The Season For REIT Dividends. Four more equity REITs boosted their dividends this week: data center REIT CoreSite (COR), net lease REIT WP Carey (WPC), apartment REIT Mid-America (MAA), and self-storage REIT CubeSmart (CUBE). In all 48 equity REITs have boosted dividends this year while 66 REITs have reduced. We'll discuss this in more detail in our Real Estate Weekly Recap published tomorrow morning.

Mortgage REITs

As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, mortgage REITs snapped a five-week winning streak as residential mREITs finished lower by 0.4% today and ended the week lower by 2.4%. while commercial mREITs finished off by 0.4% today to end the week lower by 0.9%. Roughly a dozen mREITs declared fourth quarter dividends this week, all of which maintained payouts at current levels. 32 of the 41 mortgage REITs are currently paying dividends below their pre-pandemic rates.

REIT Preferreds & Bonds

As tracked in our REIT Preferred Stock & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished lower by 0.05% today, on average, but outperformed their respective common stock issues by an average of 0.40% led by strong performance from the preferred issues of Pennsylvania REIT (PEI). Among REITs that offer preferred shares, the performance of these securities has been an average of 17.97% higher in 2020 than their respective common shares. The average REIT preferred trades at a 5% discount to Par Value and has an average current yield of 6.80%.

Economic Data This Week

We'll have a full recap of this week's economic data and a preview of the week ahead in our Real Estate Weekly Outlook published on Saturday morning.

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