Dividend Boosts • Gamestop Hearing • REIT Earnings
REITs, ETF investing, Dividend Investing, Homebuilders
Seeking Alpha Analyst Since 2012
Real Estate • High Yield • Dividend Growth
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Summary
- U.S. equity markets were broadly lower Thursday following a downbeat slate of economic data while all eyes were on a fiery Congressional hearing related to last month's short squeeze frenzy.
- Declining for the third-straight day, the S&P 500 finished lower by 0.4% today while the Dow Jones Industrial Average slipped 120 points. Mid-Caps and Small-Caps each dipped more than 1%.
- Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs finished lower by 0.4% with 14-of-19 property sectors in negative-territory.
- Amid another frenetic slate of REIT earnings reports, Mortgage REIT NexPoint Real Estate (NREF) boosted its dividend by 19%. Meanwhile, shopping center REIT RPT Realty reinstated its previously suspended dividend.
- Troubled retail REIT Tanger Outlets (SKT) reported that leasing spreads and occupancy rates remain in free fall. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021.
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 were broadly lower Thursday following a generally downbeat slate of economic data this morning while all eyes were on a fiery Congressional hearing related to last month's short-squeeze frenzy. Declining for the third-straight day, the S&P 500 ETF (SPY) finished lower by 0.4% today while the Dow Jones Industrial Average (DIA) slipped 120 points. Mid-Caps (MDY) and Small-Caps (SLY) dipped more than 1% each. Real estate equities were mostly lower today amid another busy day of earnings reports as the broad-based Equity REIT ETFs (VNQ) finished lower by 0.4% with 14-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) declined by 1.7%.
Nine of the eleven GICS equity sectors finished in negative territory today as the Energy (XLE) sector pulled-back as the Southern U.S. begins to thaw after this week's deep freeze. Economically-sensitive sectors including Financials (XLF) and Materials (XLB) were among the laggards after Jobless Claims data showed that the employment recovery took a step back last week after trending in a positive direction in late January. Homebuilders and the broader Hoya Capital Housing Index also pulled back today on a mixed residential construction report as Building Permits surged but Housing Starts pulled back as poor weather and limited lumber availability constrained construction in January as builders continue to see homes as fast as they can build them.
Real Estate Earnings Update
Last week we published REIT Earnings Halftime Report: Dividend Revival. We're now at past halfway point of another newsworthy REIT earnings season. Results thus far have generally been better than expected as dividend cuts have given way to dividend boosts. 18 equity REITs have now boosted their dividend this year, the majority of which were among the 52 REITs that increased their dividend last year. Rent collection - and interest collection for mREITs - has recovered to "normalized" levels across all major property sectors outside of retail. The back half of earnings season could bring more fireworks as many of the more-troubled REITs have yet to report results.
Malls: Tanger Outlets (SKT) finished higher by 1.0% after reporting results yesterday afternoon. Consistent with the rest of the mall sector, the troubled retail REIT reported that leasing spreads and occupancy rates remain in free fall as SKT reported a substantial 5.3 percentage-point decline in occupancy rates in Q4 compared to the prior year. FFO/share dipped 32% in 2020 and guidance calls for another 3% decline in 2021. Similar to the other mall REITs, the 95% "headline" collection rate overstates the true rate of collection as Tanger has collected roughly 82% of initially billed rents since the start of Q2.
Data Center: CyrusOne (CONE) finished lower by 1.4% despite reporting its strongest quarter ever of leasing activity as the firm signed $49.3 million in incremental annualized revenues, bringing the total for the data center sector to $229 million in Q4, which eclipsed the prior record set in Q2. Forward guidance was softer-than-expected, however, as CONE sees AFFO/share growth of just 1.3% next year at the midpoint of its range after recording growth of 7.4% in 2020. As we'll discuss in our upcoming Data Center REIT report published this evening on The REIT Forum, data center REITs have taken a breather so far in 2021 despite a strong slate of earnings reports.
Shopping Centers: Urban Edge (UE) finished lower by 0.9% after reporting yesterday afternoon. UE reported that it collected 93% of rents in Q4, but ultimately ended 2020 with a decline in same-store net operating income (SS NOI) of -14.1%, which was below the shopping center average of -10.5%. Site Centers (SITC) finished higher by 0.1% today after reporting that it also collected 93% of rents in Q4 while its SSNOI ultimately ended 2020 with declines of -10.9%. RPT Realty (RPT) gained 0.2% after reporting decent results yesterday afternoon and reinstating its dividend at $0.075 per share. Before the pandemic, RPT was paying a dividend of $0.22 per share. Encouragingly, both RPT and SITC provided guidance that calls for a rebound in FFO per share in the mid-single digits in 2021.
Industrial: Lexington Realty (LXP) finished higher by 0.6% after reporting mixed results this morning. Despite collecting essentially 100% of rents through 2020, FFO per share ended the year lower by 5.0% and the net lease industrial REIT sees another 2.6% decline in 2021 as the firm continues to undergo a "capital recycling" plan of disposing of "lower quality" assets and shift into higher value logistics-oriented assets. Industrial Logistics (ILPT) dipped 3.3% after reporting results that were shy of consensus estimates yesterday afternoon that its same-store cash NOI was essentially flat in 2020. We'll hear results from Americold (COLD) this afternoon.
This afternoon, we'll hear results from casino REITs VICI Properties (VICI) and Gaming & Leisure Properties (GLPI). Last week, we published Casino REITs: Roll The Dice. Casino REITs delivered surprisingly steady performance in 2020 despite the temporary closure and dramatically reduced usage of casino facilities throughout the pandemic. Unlike hotel REITs, casino REITs typically own properties under a long-term, triple-net master lease structure, leaving most of the financial and operational risk to their tenants - the casino operators. With an average dividend yield above 5%, we view the casino REIT sector as a compelling alternative to other more troubled property sectors. Selectivity is critical, and we prefer the "destination" casinos and tenant operators with a solid foothold into the online gaming ecosystem.
Mortgage REITs
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 2.2% today and are now lower by 2.6% on the week. Commercial mREITs finished lower by 1.0% and are now off by 0.9% on the week. NexPoint Real Estate Finance (NREF) jumped 7.2% after it reported solid Q4 results this morning and raised its dividend by 19% to 0.475/share, one of just four mREITs to raise its dividend since the start of 2020. Armour Residential (ARR) finished lower by 3.2% today after reporting yesterday afternoon that its book value per share (BVPS) was $12.32 at the end of Q4, which was roughly in-line with estimates and up 4.9% from the prior quarter. Ares Commercial (ACRE) gained 1.7% today after reporting results that were generally in-line with estimates this morning.
This afternoon, we'll hear results from Hannon Armstrong (HASI) and Ellington Financial (EFC). 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 0.19% today, on average, and outperformed their respective common stock issues by an average of 1.20%. So far in 2021, REIT Preferred stocks are higher by 2.10%. 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%.
Economic Data This Week
We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.
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