Daily Recap

• U.S. equity markets finished lower Friday, capping-off a choppy week that saw the major indexes finish lower for a third-straight week as hope dims for another round of fiscal stimulus.
• The S&P 500 slipped 1.3% today to finished lower by roughly 1% on the week. The tech-heavy Nasdaq 100 slipped 1.3% today, also ending the week lower by 1%.
• After a strong start to the week, real estate equities were under pressure on Thursday and Friday. Equity REITs finished lower by 2.2% today with all 18 sectors in negative-territory.
• Consumer Sentiment rebounded more than expected in early September to the highest level since March, but a reacceleration in the coronavirus pandemic in Europe has renewed concerns over a potential "second wave" in the United States.
• We saw a flurry of dividend announcements over the last week including another pair of dividend hikes from net lease REITs Realty Income (O) and W.P. Carey (WPC). 28 equity REITs have hiked dividends this year.

Real Estate Daily Recap

U.S. equity markets finished lower Friday, capping-off a choppy week that saw the major indexes finish lower for a third-straight week as the prospects for another round of fiscal stimulus continue to dim. The S&P 500 ETF (SPY) slipped 1.3% today to finished lower by roughly 1% on the week. The tech-heavy Nasdaq 100 (QQQ), meanwhile, slipped 1.3% on the day, also ending the week lower by roughly 1%. After a strong start to the week, real estate equities were under pressure on Thursday and Friday, erasing their weekly gains, as the broad-based Equity REIT ETF (VNQ) finished lower by 2.2% today with all 18 property sectors in negative territory. The Mortgage REIT ETF (REM) slipped 0.8% today but ended the week higher by 4%. 

Consumer Sentiment rebounded more than expected in early September to the highest level since March, but a reacceleration in the coronavirus pandemic in Europe has renewed concerns over a potential "second wave" of the outbreak in the United States, even as the outbreak has slowed stateside since its peak in mid-July. All 11 GICS equity sectors finished in negative territory today, dragged down by the Utilities (XLU), and Technology (XLK) sectors. Homebuilders and the broader Hoya Capital Housing Index finished lower today but were among the leaders on the week after another strong slate of housing data including record-high Homebuilder Sentiment and data showing that recently relentless housing demand has continued into the Autumn.  

Commercial Equity REITs

We saw a flurry of dividend announcements over the last week including another series of dividend hikes from net lease REITs Realty Income (O) and W.P. Carey (WPC) this morning and yesterday afternoon, respectively. Both net lease REITs had both previously raised their dividend earlier this summer, and we discussed the sector in a recent report: Net Lease REITs: Reopening Revival. We've now tracked 28 equity REITs that have raised dividends in 2020 - primarily in the "essential" property sectors - technology, housing, and industrials - compared to the 64 equity REITs that have reduced or suspended their dividend.

Yesterday afternoon, we published Timber REITs: Literally On Fire. One of the best-performing REIT sectors this year, Timber REITs have nearly doubled since their mid-pandemic lows in March, reignited by a rejuvenation in the suddenly red-hot U.S. housing market. Housing has proven to be the "ultimate essential service." Households have exhibited a propensity to prioritize housing-related payments and investments in home improvement and living situation upgrades amid the pandemic. Lumber prices have soared to record-highs from the combination of insatiable demand and reduced supply resulting from pandemic-related production shutdowns and forest fires raging in the Pacific Northwest. Rayonier (RYN) and Weyerhaeuser (WY) are the most "geographically exposed" REITs to the West Coast wildfires and both commented this week that direct impacts are not expected to be material, except for indirect impacts through lumber price increases.

Also of note, Broadstone Net Lease (BNL) listed yesterday and priced 33,500,000 shares of its common stock at a price to the public of $17.00 per share, raising roughly $570 million, the largest REIT IPO since the 2018 IPOs of casino REIT VICI Properties (OTC:VICI) and cold storage operator Americold Realty (COLD). Our partner Brad Thomas covered the IPO in a report published on the iREIT on Alpha Marketplace yesterday. Upon reviewing BNL’s portfolio, we view the company as a direct peer to W.P. Carey (WPC), with a portfolio composed of industrial (44%), healthcare (20%), restaurants (15%), office (10%), and retail (9%) net leased properties. The REIT IPO pipeline is likely to remain quiet in 2020 given the turbulent environment and steep NAV discounts across most sectors. 

We also heard a flurry of rent collection and business updates over the last 24 hours. Shopping center REIT Saul Centers (BFS) provided a business update in which it indicated that 100% of its shopping centers are open. BFS collected 88% of August and 89% of July rents, up from the 81% collection rate for Q2. Gladstone Commercial (GOOD) announced that it collected 99% of September rents, consistent with 99% of August and July rents that were paid and collected and 98% of June, May, and April cash base rents.

Mortgage REITs

As tracked in our Mortgage REIT Tracker available to iREIT on Alpha subscribers, residential mREITs declined by 0.4% today but ended the week with gains of 5.9%. Commercial mREITs declined by 0.7% today but ended the week higher by 2.9%. A flurry of dividend announcements this week in which all mREITs either maintained or raised dividends was seen as a positive signal for the sector, which has rebounded nearly 100% from its lows in early April. Earlier this month, we published our Mortgage REIT Earnings Recap where we discussed some of the broader trends in the mREIT industry.

Hunt Companies (HCFT) became the second mortgage REIT to raise its dividend above pre-pandemic levels by declaring a $0.085/share quarterly dividend, 13% increase from prior dividend of $0.075. HCFT joins Arbor Realty (ABR) as the only mREIT that have increased their dividend in 2020 to levels above 2019 payouts. Yesterday afternoon, Cherry Hill Mortgage (CHMI) declared a $0.27/share quarterly dividend, in line with previous.

REIT Preferreds & Bonds

As tracked in our all-new REIT Preferred Stock & Bond Tracker available to iREIT on Alpha subscribers, REIT Preferred stocks finished lower by 0.08% today, on average, but outperformed their respective common stock issues by an average of 1.39%. Among REITs that offer preferred shares, the performance of these securities has been an average of 19.86% higher in 2020 than their respective common shares. Preferred stocks generally offer more downside protection, but in exchange, these securities offer relatively limited upside potential outside of the limited number of “participating” preferred offerings that can be converted into common shares.

This Week's Economic Calendar

It was a busy week of economic data. We'll have a full recap of this week's data in our Real Estate Weekly Outlook report published tomorrow morning. 

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.