- U.S. equity markets retreated from record highs today - dragged down by pressure on large-cap technology stocks - as investors remain jittery about emerging pockets of inflationary pressures.
- Following gains of 1.2% last week, the S&P 500 finished lower by 1.0% today while Mid-Caps declined 1.2% and Small-Caps fell 2.0%. The tech-heavy Nasdaq 100 dipped 2.5%.
- Real estate equities were the relative leaders today as the broad-based Equity REIT Index finished fractionally higher with 12 of 19 property sectors in positive territory.
- Bluerock Residential (BRG) jumped more than 5% after reporting accelerating apartment rent growth across its Sunbelt markets. Blended rent growth jumped 5.8% and rose to 7.7% in April.
- REIT earnings season wraps-up this week. Inflation and retail sales data highlight this week's economic calendar with CPI on Wednesday, PPI on Thursday, and Retail Sales on Friday.
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 retreated from record highs today - dragged down by pressure on large-cap technology stocks - as investors remain jittery about emerging pockets of price pressures ahead to a busy week of inflation data. Following gains of 1.2% last week, the S&P 500 ETF (SPY) finished lower by 1.0% today while the Mid-Cap 400 (MDY) declined 1.2% and the Small-Cap 600 (SLY) fell 2.0%. The tech-heavy Nasdaq 100 (QQQ) dipped 2.5%. Real estate equities were the relative leaders today as the broad-based Equity REIT ETFs (VNQ) finished fractionally higher with 12 of 19 property sectors in positive territory while Mortgage REITs (REM) declined by 0.7%.
As discussed in our Real Estate Weekly Outlook, weaker-than-expected employment data sparked concern over emerging labor shortages, one of several notable shortages emerging during post-pandemic economic reopenings. Ahead of inflation data later this week, the 10-Year Treasury Yield climbed 3 basis points to close at 1.60% today. Five of the eleven GICS equity sectors finished higher on the day, led to the upside by domestic-focused defensive sectors - Utilities (XLU), Consumer Staples (XLP), and Real Estate (XLRE). Residential REITs and home improvement retailers led the Hoya Capital Housing Index to fresh highs after data from Redfin (RDFN) showed continued and unrelenting demand for housing.
Inflation and retail sales data highlight this week's economic calendar. On Wednesday, we'll see the Consumer Price Index for April which is expected to show the sharpest year-over-year rise since 2008 at 3.6%. On Thursday, we'll see the Producer Price Index which is also expected to show the sharpest year-over-year rise since 2008 at 6.0%. On Friday, we'll see the Retail Sales report for April which is expected to climb to new record-highs following the stimulus-aided surge in March. We'll also be watching for shifts in inflation expectations and consumer confidence on Friday in the Survey of Consumers as well as Jobless Claims data on Thursday.
Commercial Equity REITs
Casinos: Today, we published Vegas Is Back, Baby. One of the best-performing REIT sectors since the start of the pandemic, Casino REITs have proven to be surprisingly resilient despite the intense struggles faced by the broader leisure industry. Earnings reports from Casino REITs and operators painted a particularly bright picture for the tourism recovery. Caesars noted that "weekends in Vegas are sold-out for the foreseeable future." Fueled by spotless rent collection and accretive acquisitions, these REITs reported strong momentum in early 2021 with AFFO growth averaging nearly 9% in Q1. VICI Properties (VICI) projects 12.5% growth this year. In this report, we examined trends in the industry and the inflation sensitivity of these REITs.
Apartments: Bluerock Residential (BRG) jumped more than 5% after reporting strong Q1 results - particularly on rental rates. BRG saw blended lease rates rise 5.8% in Q1 - trailing only IRT for tops in the sector - and saw an acceleration in April to 7.7%. BRG commented, "Renewals were consistently strong throughout the first quarter, but it was new lease rates earning positive in February that really drove the significant acceleration in average growth on a sequential month-over-month basis." Mirroring the surge in home values, apartment rents have significantly reaccelerated over the past six months, particularly in Sunbelt and suburban markets.
Prison: GEO Group (GEO) jumped 4.1% after reporting decent Q1 results and boosting its 2021 earnings guidance. GEO now sees full-year FFO between $2.23-$2.31, implying a year-over-year decline of -9.6%, up from its prior outlook which called for a -19.1% plunge in FFO this year. The guidance also incorporates previously announced expirations of service contracts with the federal Bureau of Prisons and the non-renewal by the U.S. Marshal's Service of a contract for GEO's Queens Detention Center in New York. GEO's Board, which suspended its quarterly dividend on April 7, is evaluating GEO's structure as a REIT and expects to conclude its review in Q4 2021.
Mall: Simon Property (SPG) gained 1.7% after it announced last Friday that it has partnered again with Authentic Brands to purchase another retailer - Eddie Bauer - adding the outdoor gear retailer to the lineup of acquired retail brands including Aeropostale, Forever 21 and Brooks Brothers. The group is buying the brand from a unit of Golden Gate Capital 12 years after the PE firm acquired it out of bankruptcy. The financial terms of the deal were not disclosed. A strategy that does have successful precedent - notably the acquisition of Aeropostale in 2016 - the investments will help keep many storefronts open, at least for the time being. Simon reports Q1 results this afternoon and Macerich (MAC) reports tomorrow.
We're on the home stretch of REIT earnings season and this afternoon, we'll hear results from Simon Property (SPG), Preferred Apartments (APTS), and National Health Investors (NHI). Last week week, we published our REIT Earnings Halftime Report. The major themes this quarter have been "Beat and Boost" and the revival of long-dormant "Animal Spirits." Roughly 85% of REITs topped consensus earnings estimates. Of the 83 REITs and homebuilders that provide full-year guidance, nearly two-thirds raised their full-year estimates. Positive surprises thus far in Q1 have been primarily in the residential REIT sectors where self-storage, manufactured housing, and sunbelt-focused apartment REITs have reported stellar results.
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 1.5% today following a decline of 0.3% last week. Commercial mREITs finished lower by 1.2% after ending last week with gains of 0.4%. We'll hear results this afternoon from Broadmark Realty (BMRK), Cherry Hill Mortgage (CHMI), and Lument Finance (LFT). Cannabis-focused mREIT AFG Gamma (AFCG) will reports its first public results tomorrow.
REIT Preferreds & Bonds
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished lower by 0.21% today, on average, but outperformed their respective common stock issues by an average of 1.04%. So far in 2021, REIT Preferred stocks are higher by 7.27% on a price return basis. The average REIT preferred currently pays a dividend yield of 6.26% and trades at a slight premium to par value.
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