Stimulus Signed • Hotel Rescue • Dividend Bump

Dec. 28, 2020 5:20 PM ETThe Hoya Capital Housing ETF (HOMZ), VNQAAIC, 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, AIRC, 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, CNTY, COLD, CONE, COST, CPI, CPLG, CPRJ, CPT, CRM, CSR, CSR.PR.C, 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

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Summary

U.S. equity markets climbed to fresh record-highs Monday after President Trump retreated from veto threats and approved the $900B COVID-19 stimulus package following months of partisan battles in Congress.
After finishing flat last week, the S&P 500 finished higher by 0.9% today while the Dow Jones Industrial Average gained 204 points. Mid-Cap and Small-Cap stocks lagged after recent strong outperformance.
Following gains of 0.3% last week, real estate equities finished mostly higher today led by the residential REIT sectors as the Equity REIT ETF gained 0.6% today with 15-of-19 sectors.
After disclosing last week that it may file for bankruptcy if can't access additional capital to fund its business, Ashford Hospitality (AHT) surged more than 25% today after getting a financing commitment from Oaktree Capital.
This afternoon, Invesco Mortgage (IVR) declared a $0.08/share quarterly dividend, a 60% increase from its prior dividend of $0.05 but still below its pre-pandemic rate of $0.50 per share.

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 climbed to fresh record-highs Monday after President Trump retreated from veto threats and approved the $900B COVID-19 stimulus package following months of partisan battles in Congress. After finishing flat last week, the S&P 500 ETF (SPY) finished higher by 0.9% today while the Dow Jones Industrial Average (DIA) gained 204 points. Following gains of 0.3% last week, real estate equities finished mostly higher today led by the residential REIT sectors as the broad-based Equity REIT ETF (VNQ) gained 0.6% today with 15 of 19 property sectors in positive territory. The Mortgage REIT ETF (REM) gained 0.7% on the day.

Nine of the eleven GICS equity sectors finished higher on the day led by the Communications (XLC), Consumer Discretionary (XLY) sectors. As discussed in our Real Estate Weekly Outlook, the newly-signed stimulus package will send direct payments of $600 to most Americans, provide an additional $300 per week in enhanced unemployment benefits, and provide additional funds for the Paycheck Protection Program extension. New to this stimulus relief bill is a program that will provide $25B for rental assistance which we believe will be a significant benefit to residential rental operators. Residential REITs were indeed among the leaders in the Hoya Capital Housing Index today, offsetting a pull-back from the recently high-flying single-family homebuilders.

After a couple of jam-packed weeks of economic data, it'll be a slower week of data in the New Years-shortened week ahead. On Tuesday, we'll see Case Shiller Home Price Index data for October which is expected to show a continued reacceleration in home prices amid a mounting housing shortage. On Wednesday, we'll see Pending Home Sales data for November which is expected to show a modest uptick from October. As usual, we'll also be watching the weekly MBA Mortgage Applications data and Jobless Claims data on Thursday. Markets will be closed on Friday for New Year's Day.

Commercial Equity REITs

Hotels: After disclosing last week that it may file for bankruptcy if can't access additional capital to fund its business, Ashford Hospitality (AHT) surged more than 25% today after getting a $200M financing commitment from funds managed by Oaktree Capital Management. Hotel REITs were among the leaders today, extending their rally over the past quarter to more than 50% aided by TSA Checkpoint data which showed a strong rebound in holiday air travel over the past week. Following a "double-dip" in early December, domestic air travel climbed to over 50% of prior-year levels for the first time since the pandemic on two consecutive days this past week.

This evening, we will publish our updated report on the Homebuilder sector on The REIT Forum. An antihero of the prior financial crisis, Homebuilders have seemingly been on a vendetta over the last eight months, asserting themselves as the unexpected leader of the early post-pandemic recovery. The sharp rebound in housing market activity has been aided by longer-term macroeconomic trends of favorable millennial-led demographics, historically low housing supply, and near-record low mortgage rates. Housing remains an “unloved” sector despite the compelling long-term tailwinds at its back, trading at deep P/E discounts to the S&P 500 despite their stellar growth rates and favorable long-term outlook.

Mortgage REITs

As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 0.4% today after gaining 1.0% last week. Commercial mREITs finished higher by 0.5% after gaining 1.1% last week. This afternoon, Invesco Mortgage (IVR) declared a $0.08/share quarterly dividend, a 60% increase from its prior dividend of $0.05 but still below its pre-pandemic rate of $0.50 per share.

Also this afternoon, ARMOUR Residential (ARR) announced that it plans to maintain its currently monthly dividend of $0.10/share, which is below its pre-pandemic monthly rate of $0.17/share. As discussed in Last Minute Gifts for REIT Investors, there are now just three mREITs that have yet to resume their common share dividends: Exantas Capital (XAN), Arlington Asset (AAIC), and Colony Credit (CLNC). Of the 41 mREITs in the NAREIT universe, 2 will pay higher dividends in 2020 compared to 2019, 7 will pay the same rate, while 32 mREITs will pay lower distributions.

REIT Preferreds & Bonds

As tracked in our REIT Preferred Stock & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.84%, on average, but underperformed their respective common stock issues by an average of 0.44%. Among REITs that offer preferred shares, the performance of these securities has been an average of 14.04% 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%.

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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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