REITs Rally • Office Dividend Cut • Apartment Spin-Off
REITs, ETF investing, Dividend Investing, Homebuilders
Seeking Alpha Analyst Since 2012
Real Estate • High Yield • Dividend Growth
Visit www.HoyaCapital.com for more information and important disclosures. Hoya Capital Research is an affiliate of Hoya Capital Real Estate ("Hoya Capital"), a research-focused Registered Investment Advisor headquartered in Rowayton, Connecticut.
Founded with a mission to make real estate more accessible to all investors, Hoya Capital specializes in managing institutional and individual portfolios of publicly traded real estate securities, focused on delivering sustainable income, diversification, and attractive total returns.
Collaborating with ETF Monkey, Retired Investor, Gen Alpha, Alex Mansour, The Sunday Investor, and Philip Eric Jones for Marketplace service - Hoya Capital Income Builder.Hoya Capital Real Estate ("Hoya Capital") is a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations is an affiliate that provides non-advisory services including research and index administration focused on publicly traded securities in the real estate industry.
This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.
The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.
Readers should understand that investing involves risk and loss of principal is possible. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.
Hoya Capital has no business relationship with any company discussed or mentioned and never receives compensation from any company discussed or mentioned. Hoya Capital, its affiliates, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and additional important disclosures is available at www.HoyaCapital.com.
Summary
- U.S. equity markets rallied Tuesday on signs of progress on the long-stalled fiscal stimulus renewal and amid the continued deployment and administration of coronavirus vaccinations across the United States.
- Finishing less than 0.5% from fresh record-highs, the S&P 500 finished higher by 1.3% today while the Dow Jones Industrial Average jumped 338 points. Mid-Caps and Small-Caps set fresh record-highs.
- Real estate equities led the gains today as the broad-based Equity REIT ETF jumped 2.1% with 17 of 18 property sectors in positive territory. Mortgage REITs gained 1.6%.
- Cannabis REIT Innovative Industrial (IIPR) announced yesterday afternoon that it was increasing its dividend for the third time this year. IIPR is one of 46 equity REITs that has raised its dividend this year and one of six REITs that has raised multiple times this year.
- Several troubled property sectors are still moving in the wrong direction. Office REIT Paramount Group (PGRE), which owns a NYC and SF portfolio, slashed its dividend by 30%. Just 6 REITs have reduced their dividend since June, 4 of which have been office REITs.
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 in its entirety on The REIT Forum and post this condensed version on our website and Seeking Alpha blog to cover significant news and events. Subscribe to our free email list to keep up with the latest developments in the commercial and residential real estate sectors. Follow our real-time commentary on Twitter and LinkedIn.
U.S. equity markets rallied Tuesday on signs of progress on the long-stalled fiscal stimulus renewal and amid the continued deployment and administration of coronavirus vaccinations across the United States. Finishing less than 0.5% from fresh record-highs, the S&P 500 ETF (SPY) finished higher by 1.3% today while the Dow Jones Industrial Average (DIA) jumped 338 points. The tech-heavy Nasdaq 100 (QQQ) eclipsed record-highs, gaining 1.0%. Real estate equities led the gains today as the broad-based Equity REIT ETF (VNQ) jumped 2.1% with 17 of 18 property sectors in positive territory. The Mortgage REIT ETF (REM), meanwhile, gained 1.6% on the day.
Coronavirus vaccinations have now commenced in all fifty states and shipments to date of Pfizer's (PFE) vaccine are enough to vaccine nearly 3 million individuals. More vaccines are on the way after the FDA cleared the way for the approval of Moderna's (MRNA) vaccine which could begin shipping "within days." All 11 GICS equity sectors finished higher on the day, led by the Utilities (XLU), Energy (XLE), and Materials (XLB) sectors. Residential REITs lifted the Hoya Capital Housing Index ahead of a jam-packed slate of housing data over the next three days.
Commercial Equity REITs
Today, we published Cannabis REITs: High on Growth. Cannabis REITs - Innovative Industrial (IIPR) and Power REIT (PW) - have been far-and-away the best-performing property sector for the second year in a row. Marijuana has continued along the seemingly unceasing path towards legalization. After the 2020 election, medical usage is now legal in 35 states while recreational usage is legal in 15 states, but it's unclear whether the positive demand-effects of potential federal legalization would outweigh the negative supply-effects for cannabis REITs. For growth-oriented investors seeking exposure to cannabis, cannabis REITs offer an attractive and differentiated option to play the space through real estate ownership.
IIPR serves as an example (albeit an extreme case) of a theme that we discuss extensively: that REITs can be far more growth-oriented than many investors believe, and that elevated share price valuations can actually have positive implications for the underlying business operations, particularly in real estate property sectors that lean heavily on acquisitions as a source of growth. Right on cue, Innovative Industrial (IIPR) announced yesterday afternoon that it was increasing its dividend for the third time this year. IIPR is one of 46 equity REITs that has raised its dividend this year, one of six REITs that has raised multiple times this year, and is now the only REIT that has raised its dividend three times in 2020.
While most of the REIT sector has been either maintaining or increasing their dividend over the last several months, several troubled property sectors are still moving in the wrong direction. Office REIT Paramount Group (PGRE), which owns a portfolio concentrated in New York City and San Francisco, declared a $0.07/share quarterly dividend, a 30% decrease from its prior dividend of $0.10. PGRE is just the sixth equity REIT to decrease or suspend its dividend since the end of June. Four of those six have been office REITs. As discussed in 'Tis The Season For REIT Dividends, this particular dividend declaration season should be especially interesting as REITs that had previously suspended or reduced dividends amid the pandemic seek to meet their distribution requirements to qualify as a REIT.
Apartments: The separation of Apartment Investment and Management into two separate entities - Aimco (AIV) and Apartment Income REIT (AIRC) was completed today. AIV, which will retain the development and redevelopment businesses and a smaller portfolio of assets valued at roughly $1.5 billion, closed at $5.04 today. AIRC, now owns a roughly $10 billion apartment portfolio, closed at $38.09. Shareholders in AIV received exactly one share of AIRC for each share of AIV. Combined, the shares closed at $43.13, which was 6.9% above its prior close yesterday afternoon at $40.33.
Mortgage REITs
As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 1.8% today and are now higher by 1.7% on the week. Commercial mREITs gained 1.6% today to push their gains to 1.8% this week. Ready Capital (RC) jumped more than 4% today after it declared a $0.35/share quarterly dividend yesterday afternoon, a 16.7% increase from its prior dividend of $0.30, but still below its pre-pandemic level of $0.40 per share. 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 0.38%, on average, and underperformed their respective common stock issues by an average of 2.34%. Among REITs that offer preferred shares, the performance of these securities has been an average of 15.17% 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 6.81%.
Economic Data This Week
Following a slow week of economic data, we have a jam-packed slate of data in the week ahead. On Wednesday, we'll see Retail Sales data for November, which set fresh record-highs last month. Also on Wednesday, the NAHB will release Homebuilder Sentiment data for December, which also climbed to the highest level on record in the last report. On Thursday, we'll see Housing Starts and Building Permits for November which are each expected to continue their strong post-pandemic rebound. We'll see a flurry of PMI data throughout the week, and on Wednesday and Thursday, we'll be watching the weekly Mortgage Applications and Jobless Claims data as well.
Announcement: Hoya Capital Joins The REIT Forum
Hoya Capital is excited to announce that we’ve teamed up with The REIT Forum to bring the premier research service on Seeking Alpha to the next level. Exclusive articles contain 2-3x more research content including access to The REIT Forum's exclusive ratings and live trackers and valuation tools. Sign up for the 2-week free trial today! The REIT Forum offers unmatched coverage and top-quality model portfolios for Equity and Mortgage REITs, Real Estate ETFs and CEFs, High-Yield BDCs, and REIT Preferred Stocks & Bonds.
Join our Mailing List on our Website
The REIT Forum is the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links to all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.
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.
I am/we are long all holdings listed at www.HoyaCapital.com
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.