Daily Recap

• U.S. equity markets finished higher Friday, pushing the major averages to their best week in three months, driven by renewed hope for a compromise on the ever-elusive fiscal stimulus deal.
• Ending the week with gains of nearly 4%, the S&P 500 finished higher by 0.9% today while the tech-heavy Nasdaq 100 gained 1.4%. The Dow Jones Industrial Average added 161-points.
• Finishing the week with more modest gains of around 1.5%, the broad-based Equity REIT ETF (VNQ) finished lower by 0.4% today with 15 of 18 property sectors in negative-territory.
• Rent Paid. The National Multifamily Housing Council’s Rent Payment Tracker found that rent collection is back in-line with pre-pandemic levels despite the dire forecasts to the contrary.
• We'll have a full recap of the reasons behind the equity market rally and an analysis of this week's slate of economic data in our Real Estate Weekly Outlook report published Saturday morning.

Real Estate Daily Recap

U.S. equity markets finished higher Friday, pushing the major averages to their best week in three months, driven by renewed hope for a compromise on the ever-elusive fiscal stimulus deal. Ending the week with gains of nearly 4%, the S&P 500 ETF (SPY) finished higher by 0.9% today while the tech-heavy Nasdaq 100 (QQQ) gained 1.4% and the Dow Jones Industrial Average (DIA) added 161-points. Finishing the week with more modest gains of around 1.5%, the broad-based Equity REIT ETF (VNQ) finished lower by 0.4% today with 15 of 18 property sectors in negative territory. The Mortgage REIT ETF (REM) dipped 1.6% today but ended the week higher by 1.4%.

The on-again-off-again status of stimulus negotiations whipsawed equity markets throughout the week, ending on a high-note after President Trump proclaimed that he would like to "Go Big" on a relief package. 8 of 11 GICS equity sector finished higher on the day, while all 11 finished higher by at least 1.4% on the week. Another solid week from home builders and home improvement companies lifted the Hoya Capital Housing Index to strong gains on the week as the housing industry continues to lead the recovery. We'll have a full recap of the reasons behind the equity market rally and an analysis of this week's slate of economic data in our Real Estate Weekly Outlook report published Saturday morning. 

Commercial Equity REITsWe heard a few more business updates and rent collection reports over the last 24 hours ahead of the start of Q3 earnings season in 11 days. Industrial REIT Terreno Realty (TRNO) gained 1% today after it provided a pre-earnings update in which it announced that it achieved a 20.3% increase in cash rents on new and renewed leases in Q3 and a 25.2% increase year-to-date. TRNO's portfolio was 98.5% occupied at the end of Q3, up a solid 200 basis points from the 96.5% rate last quarter. Global Net Lease (GNL) finished lower by 2% despite announcing that 97% of the original cash rent due for the third quarter of 2020 has been received. GNL is one of 65 equity REITs to have reduced or suspended its dividend this year. 

While much has been written over the past four months about the potentially devastating effects on the rental markets from the July 31st expiration of several relief measures offered by the Cares Act in July, so far these dire forecasts have not come to fruition. Quite the opposite, in fact, as the National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 79.4% percent of apartment households paid their rent by October 6, which was back in-line with the pre-pandemic rate last October. While another round of fiscal stimulus will certainly be welcomed by landlords, we continue to point out that the existing fiscal stimulus measures are already the most significant since WWII as personal incomes have actually increased by 4.7% from last year. 

Yesterday, we published Prison REITs: The End Is Near. Prison REITs - the darkest corner of the REIT sector - have been slammed in 2020 as pandemic-related operational struggles have clashed with ever-intensifying political headwinds. Private prisons are facing an existential crisis if Democrats sweep the 2020 Elections, who have pledged to abolish the Federal use of private prisons, amounting to 50% of industry revenues. CoreCivic (CXW) announced it is abandoning the REIT structure, and GEO Group (GEO) likely isn’t far behind. While intrinsic value exists - and the U.S. needs somewhere to house its roughly two million inmates - these companies will likely face continued difficulty operating as public entities.

Mortgage REITsAs tracked in our Mortgage REIT Tracker, residential mREITs finished lower by 1.3% today but ended the week higher by 1.5%. Commercial mREITs finished lower by 1.1% today to end the week with 0.2% gains. Mortgage REIT earnings season is slated to begin in two weeks with investors anxious to hear updated dividend plans and book value estimates. Last month, we published our Mortgage REIT Earnings Recap where we discussed some of the broader trends in the mREIT industry.

REIT Preferreds & BondsAs tracked in our all-new REIT Preferred Stock & Bond Tracker, led by the preferred issues of mall REITs Pennsylvania REIT (PEI) and CBL & Associates (CBL), REIT Preferred stocks finished higher by 0.05% today, on average, but outperformed their respective common stock issues by an average of 0.53%. Among REITs that offer preferred shares, the performance of these securities has been an average of 19.66% 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 CalendarWe'll have a full recap of this week's busy slate of economic data in our Real Estate Weekly Outlook report published on Saturday 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.