Mall Earnings • Fresh Records • Bitcoin's Back
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 extended their rally Monday with the major indexes eclipsing fresh record highs on improving coronavirus data and ahead of another frenetic slate of corporate earnings reports.
- Following gains of 4.8% last week, the S&P 500 finished higher by another 0.7% today while the Dow Jones Industrial Average added another 237 points. Small-Caps jumped nearly 3%.
- Real estate equities were mostly higher today as REIT earnings season kicks into high gear. The broad-based Equity REIT ETFs gained 0.5% today with 12-of-19 property sectors in positive territory.
- Inflation data highlights this week's economic calendar. Bitcoin (BTC-USD) was also back in the headlines after Tesla (TSLA) announced an investment into the cryptocurrency.
- Mall REIT stalwart Simon Property (SPG) reported Q4 results this afternoon, noting it collected 90% of rents since the start of the pandemic, but still recorded a -17.1% decline in full-year NOI and a -24.3% decline in FFO per share in full-year 2020.
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 on The REIT Forum and occasionally on our website and this 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 extended their rally Monday with the major indexes eclipsing fresh record highs on improving coronavirus data and ahead of another frenetic slate of corporate earnings reports. Following gains of 4.8% last week, the S&P 500 ETF (SPY) finished higher by another 0.7% today while the Dow Jones Industrial Average (DIA) added another 237 points and the Small-Cap 600 (SLY) jumped nearly 3% Real estate equities were mostly higher today as REIT earnings season kicks into high gear. The broad-based Equity REIT ETFs (VNQ) gained 0.5% today with 12-of-19 property sectors in positive territory while Mortgage REITs (REM) gained 0.8%.
As discussed in our Real Estate Weekly Outlook, equity markets entered the week with positive momentum following a slate of stronger-than-expected corporate earnings reports as 81% of S&P 500 companies have beat EPS estimates thus far, among the highest on record. Bitcoin (BTC-USD) was also back in the headlines after Tesla (TSLA) announced an investment into the cryptocurrency. Ten of the eleven GICS equity sectors finished on the upside today led by the Energy (XLE), Financials (XLF), and Technology (XLK) sectors. Homebuilders and the broader Hoya Capital Housing Index also were upside standouts ahead of a busy slate of earnings results this week.
Following a busy three weeks of economic data, the week ahead will be relatively quieter, headlined by the Consumer Price Index report released on Wednesday. Inflation expectations - along with longer-term Treasury Yields - have rebounded sharply since Election Day on the prospects for additional fiscal stimulus and on improving coronavirus data, but recent inflation reports have yet to show a broad-based uptick in either consumer or producer price levels. We'll also be watching the weekly MBA Mortgage Application data on Wednesday and Jobless Claims data on Thursday.
Real Estate Earnings Update
Real estate earnings season kicks into high gear this week with roughly four dozen REITs reporting results along with a handful of housing companies. Last week, we published REIT Earnings Preview: Who Paid The Rent? While missed rents and dividend cuts were the prevailing themes in the REIT sector in mid-2020, the vaccine-driven sector rotation has been the dominant theme over the past quarter. Normalizing rent collection and positive dividend commentary could be a positive catalyst to continue the recovery. We expect a historic year for dividend increases following the wave of cuts last year.
Malls: Simon Property (SPG) is flat after-hours after reporting fourth-quarter results. SPG reported that it collected 90% of rents for the second, third and fourth quarters, combined, but still recorded a -17.1% decline in full-year net operating income ("NOI") including a -23.9% year-over-year dip in Q4. SPG recorded a -24.3% decline in FFO per share in full-year 2020, but sees FFO bouncing back by 5.6% at the midpoint of its 2021 guidance range. While SPG notes that it "feels confident we have turned the corner," forward-looking metrics still look concerning as leasing spreads remain under pressure at -6.8%, the worst quarter on record or Simon, while occupancy rates declined by a sizable 3.8 percentage-points to 91.3%.
Last week, we heard preliminary results from Macerich (MAC), which reported a 39% plunge in FFO per share for full-year 2020 and same-store NOI growth that declined by 33.3% in Q4 compared to the prior year. We also heard results from Brookfield Property (BPYU) last week, which reported a similar -25.5% year-over-year dip in same-store NOI in their retail segment. Through three quarters of 2020, mall REITs had reported a YTD FFO per share decline average just shy of 50%, weighed down by the 70%+ plunge from the lower-productivity mall REITs.
Last Friday, we published Game Stopped For Shorted REITs. The short squeeze frenzy - which sent shockwaves through financial markets and the political establishment - has fizzled out over the past two weeks following a dramatic surge from many troubled businesses. The five heavily-shorted mall REITs have plunged since the peak of the frenzy, but not quite as sharp as their retail tenants GameStop (GME) and AMC Entertainment (AMC). As expected, the beginning of earnings season has been a "reality check" for several of the recent high-flyers. Following in the footsteps of AMC Entertainment, several of these troubled mall REITs are seeking to raise much-needed capital while the kettle is still hot. 
Later today, we'll publish a deep-dive report into the Casino & Gaming REIT sector on The REIT Forum. Casino REITs - VICI Properties (VICI), Gaming & Leisure Properties (GLPI), and MGM Growth (MGP) delivered a surprisingly solid year in 2020 despite the temporary closure and dramatically reduced usage of casino facilities throughout the pandemic. Unlike hotel REITs, casino REITs own property under a long-term, triple-net lease structure, leaving most of the financial and operational risk– both on the upside and the downside – to their tenants, so occupancy rates and rent collection remained spotless. With more states moving in the direction of legalizing online gambling, we explore some of the potential disintermediation risks.
Mortgage REITs
As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 1.3% today to push their weekly gains to 5.9%. Commercial mREITs finished higher by 1.2% to end the week higher by 5.8%. We'll hear results from roughly a half-dozen mREITs in the week ahead including New Residential (NRZ), Chimera Investment Corp. (CIM), Blackstone Mortgage (BXMT), and Annaly Capital (NLY).
Last week, we published our Mortgage REIT Earnings Preview. We discussed the three trends we're watching this earnings season: 1) Updated dividend commentary, 2) Updated book values, and 3) Commentary on the mortgage and housing markets. We discussed how the robust rebound and ongoing strength in the U.S. housing sector averted outright catastrophe for many mREITs. Mortgage REITs delivered a triple-digit-percentage-point rebound to end 2020 with total returns of -23.5%.
REIT Preferreds & Bonds
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.08% today, on average, but underperformed their respective common stock issues by an average of 1.30% due primarily to the underperformance of mall REIT preferreds. Excluding the handful of retail and hotel REITs with suspended (cumulative) preferred dividends, the average REIT preferred trades at a 3% discount to Par Value and has an average current yield of 6.48%.
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.