Margin Call • Canal Unblocked • Week Ahead

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Summary

U.S. equity markets finished mostly lower Monday as higher bond yields and questions about the intent and fallout of an unusually large "block trade" from an investment firm spooked investors.
Following gains of 1.7% last week, the S&P 500 finished lower by 0.1% while the Dow Jones Industrial Average gained 0.30%. The Small-Cap and Mid-Cap Indexes each dipped 2%.
Coming off a strong week, real estate equities were mostly lower today as the broad-based Equity REIT ETFs declined by 0.6% with 15-of-19 property sectors in negative territory.
Washington Prime Group (WPG) gained 4% today after the troubled mall REIT announced that it reached an agreement with lenders to extend its forbearance agreement by two weeks, indicating that there may be some progress in refinancing talks.
Employment data highlights this week's busy economic calendar, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday.

Real Estate Daily Recap

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U.S. equity markets finished mostly lower Monday as higher bond yields and questions about the intent and fallout of an unusually large "block trade" from a large investment firm spooked investors. Following gains of 1.7% last week, the S&P 500 ETF (SPY) finished lower by 0.1% while the Dow Jones Industrial Average (DJI) gained 0.30%. Small-Caps (SLY) and Mid-Caps (MDY) each slid roughly 2%. Coming off a strong week, real estate equities were mostly lower today as the broad-based Equity REIT ETFs (VNQ) declined by 0.6% with 15-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) pulled back by 1.4%.

As discussed in our Real Estate Weekly Outlook, equity markets entered the week near record-highs after the 10-Year Treasury Yield snapped a seven-week streak of increases last week, but the benchmark yield climbed back above 1.70% in Monday's session. Six of the eleven GICS equity sectors finished in negative territory today, dragged on the downside by the Energy (XLE) and Financials (XLF) sectors after Credit Suisse (CS) and Nomura (NMR) reported that they could incur substantial losses related to suspected liquidation trades by Archegos Capital Management. Commodities prices including Oil (USO) rebounded after transit through the Suez Canal resumed following a week-long delay from a grounded containership.

On that point, employment data highlights this week's economic calendar, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of 182K in March, a moderation from the stronger-than-expected 379K gains in February. We'll also see Case Shiller Home Price Index data on Tuesday, Pending Home Sales data on Wednesday, Construction Spending data on Thursday, and a flurry of Purchasing Managers' Index (PMI) data throughout the week.

Commercial Equity REITs

Malls: Troubled Washington Prime Group (WPG) gained 4% today after announcing that it reached an agreement with noteholders and lenders to extend its forbearance agreement by two weeks to April 14, indicating that there may be some progress in refinancing talks in an effort to avoid bankruptcy. Consistent with our analysis last week in Mall REITs: It Can Always Get Worse, WPG dipped more than 30% last week after Bloomberg News reported the shopping mall owner's investment bank has approached investors to gauge early interest in providing a potential $150M in bankruptcy financing.

Single Family Rentals: The U.S. federal government, using the authority of the CDC, extended a national ban on evictions through the end of June on Monday. While SFR REITs have reported that the eviction moratorium has had only a minor impact on operations, the vast majority of the nation's 15 million SFR rental units are owned by small businesses and private landlords that have been left with few options to deal with delinquent renters. As a whole, Single-Family Rental fundamentals are among the strongest in the REIT sector. SFR REITs reported near-perfect rent collection, record-high occupancy rates, and rent growth eclipsing 5% in their recent reports. Stimulus measures have provided more than $45 billion in direct assistance to renters, but the deployment of these funds has reportedly been slow.

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 1.5% today after finishing last week with declines of 1.1%. Commercial mREITs declined by 1.0% after falling 1.4% last week. Invesco Mortgage (IVR) was among the leaders today after boosting its dividend last Friday afternoon to $0.09/share, a 12.5% increase from its prior dividend of $0.08, representing a forward yield of 9.09%.

REIT Preferreds & Bonds

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.24% today, on average, and outperformed their respective common stock issues by an average of 1.73%. So far in 2021, REIT Preferred stocks are higher by 5.45% on a price-return basis. The average REIT preferred currently pays a dividend yield of 6.36% and trades at a slight discount to par value.

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