REITs Rally • Mall Earnings • More Dividend Increases
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 rallied to fresh record-highs on Friday after inflation data failed to show a meaningful uptick in producer prices while investors digest the impacts of the $1.9 trillion stimulus package.
- Ending the week at record-highs with gains of nearly 3%, the S&P 500 finished higher by 0.1% while the tech-heavy Nasdaq 100 pulled back by 0.8% on a volatile week.
- A strong day by housing REITs led the real estate sector to broad-based gains as the Equity REIT ETFs finished higher by 1.7% with all 19 property sectors in positive-territory.
- Two more equity REITs raised their dividends over the last 24 hours: industrial REIT Americold (COLD) and net lease REIT WP Carey (WPC). We've now seen 42 equity REITs raise their dividends so far this year.
- Pennsylvania REIT (PEI) - which emerged from Chapter 11 bankruptcy in December - reported that its FFO dipped into negative territory for full-year 2020 while its Same Store NOI was lower by a sector-worst -28.2%.
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. Sign-up for our 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 and subscribe to The REIT Forum for full access to our premium analysis, exclusive tools and trackers, and The REIT Forum's exclusive ratings and model portfolios.
U.S. equity markets rallied to fresh record-highs on Friday after inflation data failed to show a meaningful uptick in producer prices while investors digest the impacts of the massive $1.9 trillion stimulus package signed yesterday. Ending the week at record-highs with gains of nearly 3%, the S&P 500 ETF (SPY) finished higher by 0.1% while the tech-heavy Nasdaq 100 (QQQ) pulled back 0.8% on another volatile week for large-cap tech. A strong day by Residential REITs led the real estate sector to broad-based gains as the Equity REIT ETFs (VNQ) finished higher by 1.7% with all 19 property sectors in positive territory while the Mortgage REIT ETFs (REM) gained 1.0%.
Nine of the eleven GICS equity sectors finished in positive territory today while all eleven were higher on the week. The strong week for REITs - which rallied more than 5% - pushed their YTD gains back above the S&P 500 and came despite another jump in the 10-Year Treasury Yield (IEF), which closed at 1.64%, the highest since before the pandemic. Despite pressure on the homebuilders today, housing financials and home improvement firms were broadly higher today, lifting the Hoya Capital Housing Index to fresh records as well ahead of a busy week of housing data in the week ahead.
Inflation data was a focus this past week after the passage of another historically-large $1.9 trillion fiscal stimulus package this week. Following CPI report earlier this week which showed muted pressure on core consumer prices in February, the Producer Price Index report this morning showed a similar trend. Core producer prices rose less than expected in February but still pushed its annual rise to 2.52%, which was the highest since mid-2019. 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.
Commercial Equity REITs
Consistent with the trends discussed earlier this week in Dividends Raised, Rents Paid, two more equity REITs raised their dividends over the last 24 hours. Industrial REIT Americold (COLD) declared a $0.22/share quarterly dividend, a 4.8% increase from its prior dividend while net lease REIT WP Carey (WPC) declared a $1.048/share quarterly dividend, a 0.2% increase from its prior rate. We've now seen 42 equity REITs raise their dividends so far through the first 11 weeks of 2021, which has been one of the strongest first quarters for REIT dividend growth on record.
Malls: Pennsylvania REIT (PEI) finished higher by about 3% today despite reporting another rough quarter of results yesterday afternoon. The troubled mall REIT - which emerged from Chapter 11 bankruptcy in December - reported that its FFO per share dipped into negative territory for full-year 2020 while its Same Store NOI was lower by a sector-worst -28.2%. Rent collection did improve in Q4 as PEI noted that its total collection rate from April through December totaled 80% of billings for those months. Total portfolio occupancy declined to 88.1%, a 4.5 percentage-point decline from last year while total renewal spreads declined another -10.4%, suggesting continued downward pressure on NOI growth in 2021.
Shopping Center: Urstadt Biddle (UBA) finished higher by roughly 3.5% today after reporting results this morning. The small-cap grocery-anchored REIT reported that its same-store NOI was lower by just 1.7% in its fiscal Q1 (ending Jan 31), a strong sequential improvement from its Q4 decline of -9.3%. Earlier this week, we published Shopping Center REITs: Too Far, Too Fast? Shopping Center REITs have continued their post-vaccine resurgence into early 2021, surging another 30% this year and pushing stock prices back near pre-pandemic levels. Shopping center REITs fared far better than their enclosed mall peers but still reported an average FFO/share decline of nearly 20% in 2020 while same-store NOI dipped over 10%. 
Apartments: AIMCO (AIV) finished higher by nearly 4% after releasing its first earnings report since the spin-off of Apartment Income (AIRC) in December. AIV - which does not currently plan to pay a regular quarterly dividend - intends to focus on developing and redeveloping apartment communities while retaining a relatively small portfolio of coastal apartment properties of 24 operating properties consisting of 6,067 total apartment units. AIV collected 98.3% of rents in 2020 and reported same-store NOI growth of -1.8% for full-year 2020 which was considerably stronger than its coastal-focused peers including Equity Residential (EQR) and AvalonBay (AVB).
Next week, we'll publish our State of the REIT Sector report, which will analyze the recently-released NAREIT T-Tracker data. Some aspects of this crisis were more acute than the Financial Crisis - including the wave of dividend cuts - but strong balance sheets and access-to-capital prevented the type of shareholder dilution that resulted in a "lost decade" for REITs. As the post-vaccine rotation has narrowed the valuation gap between the higher-quality and lower-quality REITs, we see a compelling case for bolstering one's positioning in the "essential" property sectors like housing and technology that are delivering superior growth rates - which becomes particularly important if we do indeed see sustained inflationary pressure.
Mortgage REITs
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 1.4% today to push their weekly gains to 5.6%. Commercial mREITs gained 0.9% today to end the week with 6.0% gains. Ready Capital (RC) jumped more than 7% today after reporting results yesterday afternoon. The multi-strategy mREIT reported a robust quarter for mortgage origination volume while noting that its Book Value Per Share (BVPS) climbed about 1% in Q4. Elsewhere, AGNC Investment (AGNC) finished higher by about 1% after estimating that its BVPS was $17.51 as of Feb. 28, implying a gain of 0.5% from the prior month.
REIT Preferreds & Bonds
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished lower by -0.12% today, on average, and underperformed their respective common stock issues by an average of -1.69%. So far in 2021, REIT Preferred stocks are higher by 4.55% on a price-return basis. Excluding the handful of REITs with suspended (cumulative) preferred dividends, the average REIT preferred issue trades at a 3% discount to Par Value and has an average current yield of 6.41%.
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