- Right now, most experts are saying that China won’t likely bail Evergrande out – the company that inspired yesterday’s drama.
- Goldman Sachs Managing Director and Chief China Economist Hui Shan sent out a research note yesterday saying: “The danger is precisely the contagion effect".
- White House Press Secretary Jen Psaki correctly pointed out yesterday that Evergrande is “overwhelmingly centered in China,” the problem is…so are the production bases of many major U.S. corporations.
- Finally, Real estate investment trusts (REITs) were extremelyactive yesterday, with 16 different companies making the news.
Quote of the Day:
“Can you afford to ignore China? It’s like saying you can afford to ignore the internet. I don’t think so.” – Richard Branson
Well, yesterday could have been worse. The Dow did drop well over 900 points in the afternoon, after all. And the Nasdaq’s dive took it down more than 3% for a good, long stretch of time.
But they “recovered” enough by the end of the day so that:
- The S&P 500 only lost 75.26 points, or 1.7%.
- The Dow only lost 614 points, or 1.78%.
- The Nasdaq only lost 330.06 points, or 2.19%.
As I write this, investors seem content to treat Monday’s market action as a buying opportunity. All three major indexes are up significantly.
But the headlines are much more mixed, as well they should be.
We just don’t know yet if yesterday was indicative of a serious turnaround in market sentiment or not. Right now, most experts are saying that China won’t likely bail Evergrande out – the company that inspired yesterday’s drama.
Which means short-term drama at least, no matter the ultimate wisdom of that move. (Or lack thereof.)
Goldman Sachs Managing Director and Chief China Economist Hui Shan sent out a research note yesterday saying:
“The danger is precisely the contagion effect, should a default occur without clear ‘ring-fencing’ of spillovers to other parts of the real economy or financial sector. Events over the past week suggest risks of inching toward that direction.”
“Equities and bonds issued by other developers with high leverage have sold off. Protests at Evergrande offices across China may cause reluctance among potential homebuyers more broadly. Financing pressure faced by property developers has contributed to failed land auctions in a number of cities.”
And while White House Press Secretary Jen Psaki correctly pointed out yesterday that Evergrande is “overwhelmingly centered in China,” the problem is…
So are the production bases of many major U.S. corporations.
The World According to REITs
So that’s the kind of consequences we’re all left to wonder this morning on a global level. Fortunately for us though, there’s a lot we do know for certain when we zero in on our particular focus.
Real estate investment trusts (REITs) were extremely active yesterday, with 16 different companies making the news. And that’s not even counting such announcements as Park Hotels & Resorts (PK) setting a date for its Q3-21 earnings results release.
Here are three of those updates:
- Corporate Office Properties (OFC) signed a 20-year lease with the U.S. government at its Redstone Gateway in Huntsville, Alabama. The to-be-built 206,000 square-foot space will cost OFC $60 million to construct and should be ready to use in Q1-24.
- Gladstone Commercial (GOOD) signed a five-year, three-month lease with a national credit company. That tenant now occupies half of its four-story office building in Austin, Texas, consisting of 320,000 square feet.
- Four Corners Property Trust (FCPT) acquired five well-located Caliber Collision properties across Ohio for $4.1 million. Each one is corporate-operated and net-leased. Their weighted average contracts remaining is nine years, and they were priced at a 6.6% weighted average going-in cash capitalization rate.
Oh, and last but not least, we now have our answer about how REITs fared yesterday. All things considered, I’m pretty impressed.
(Source: The Daily REITBeat)
Inflation Is a Monster REITs Can Help You Beat
One of my readers recently wanted to know if I was worried about inflation – an intensely legitimate question.
Ronald Reagan once said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.” And, considering the mess he inherited, that statement wasn’t nearly as melodramatic as it might sound.
Jimmy Carter’s policies… on top of Richard Nixon completely cutting the dollar from gold… on top of Lyndon B. Johnson’s spending sprees were devastating. Together, they destroyed businesses, wiped out personal savings, and sent the entire country into a depressing tailspin.
Today, we could be looking at similar bad policies with similar bad results. Which is why I definitely do have inflation on my radar.
Fortunately though, I also have REITs.
As I wrote months ago, they offer “natural protection against inflation” since rental contracts tend to include such considerations. In fact:
“… many leases are tied to inflation. This supports REIT dividend growth and provides a reliable stream of income regardless, helping to support the following fact…
“That, in all but two of the last 20 years, REIT dividend increases have outpaced inflation as measured by the Consumer Price Index.”
Not bad, right?
Not bad at all! Just as long as you know which ones are worth your money at any given time – both from a valuation and quality perspective.
That’s why iREIT on Alpha gives members ahead-of-the-curve advice on what’s what in REIT-dom through:
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This is your chance to try us out – without any strings attached. Activate your two-week free trial period now and see if iREIT is right for you.
I can’t wait to show you everything you’ll have at your disposal when you do…
Analyst's Disclosure: I/we have a beneficial long position in the shares of FCPT either through stock ownership, options, or other derivatives.
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