Earnings In Focus • Office REITs Stabilize • Logistics Rents Soar
U.S. equity markets were mixed Wednesday while benchmark interest rates ticked higher as investors weighed another batch of generally-solid corporate earnings results against a drumbeat of hawkish Fed commentary.
Maintaining its week-to-date gains of roughly 0.4%, the S&P 500 finished fractionally lower today, but the Mid-Cap 400 and Small-Cap 600 advanced by 0.2% and 0.1%, respectively. The Dow declined 80 points.
Led by a rebound from office REITs, real estate equities continued their strong week ahead of a busy slate of earnings results this afternoon. The Equity REIT Index gained 0.5%.
Following strong results from Prologis (PLD) earlier in the week, Rexford (REXR) and First Industrial (FR) reported very strong earnings results this afternoon, each raising their full-year FFO and NOI outlooks.
Ahead of results from SL Green (SLG) and Brandywine (BDN), office REITs pushed their week-to-date gains to roughly 6%, rebounding this week as earnings results from large and regional banks relieved some concerns over office loan performance.
Income Builder Daily Recap
U.S. equity markets were mixed Wednesday while benchmark interest rates ticked higher as investors weighed another batch of generally-solid corporate earnings results against a drumbeat of hawkish Fed commentary. Maintaining its week-to-date gains of roughly 0.4%, the S&P 500 finished fractionally lower today, but the Mid-Cap 400 and Small-Cap 600 advanced by 0.2% and 0.1%, respectively. The Dow declined 80 points, while the tech-heavy Nasdaq finished lower by 0.1%. The 2-Year Treasury Yield climbed 4 basis points to 4.25%, while the 10-Year Treasury Yield added 3 basis points to 3.60%. Led by a rebound from office REITs, real estate equities continued their strong week ahead of a busy slate of earnings results this afternoon. The Equity REIT Index gained 0.5%, with 15-of-18 property sectors in positive territory, while the Mortgage REIT Index rallied 1.3%.
Real Estate Daily Recap
Best & Worst Performance Today Across the REIT Sector
Industrial: Following strong results from Prologis (PLD) earlier in the week, Rexford (REXR) and First Industrial (FR) reported very strong earnings results this afternoon. REXR raised its full-year outlook for Funds from Operations ("FFO") and same-store Net Operating Income ("NOI"), driven by incredible rental rate growth of 80% on a GAAP basis and 60% on a cash basis - an acceleration from Q4. REXR now sees FFO growth of 8.7% - up 150 basis points from its prior outlook - and sees NOI growth of 9.9% - up 10 basis points. FR raised its full-year FFO growth outlook to 4.4% - up 175 basis points from last quarter - and boosted its NOI growth outlook to 8.3% - up 25 basis points. FR noted that it achieved cash rental rate increases of 58.3% in the first quarter, its strongest on record.
Office: Pushing their week-to-date gains to roughly 6%, office REITs have rebounded this week as earnings results from large and regional banks relieved some concerns over office loan performance. SL Green (SLG) and Brandywine (BDN) reported earnings results this afternoon. SLG reported that it leased 505k SF of space in Q1 and recorded a mark-to-market increase of 5.3% on these leases - both significant improvements from last quarter. SLG noted that its same-store cash NOI increased by 5.3% while its Manhattan same-store office occupancy was 90.2% - down from 91.2% last quarter, but reaffirmed its occupancy target 92.4% by December 31, 2023. BDN affirmed its full-year metrics, which call for same-store NOI growth of 3.5% at the midpoint, but anticipates a 15.9% in FFO this year.
Casino: Today, we published Casino REITs: Benefiting From Blackstone Distress. A success story of the "Modern REIT Era," Casino REITs have been the best-performing property sector since their emergence in the mid-2010s, honing the competitive advantages of the public REIT model to rapidly consolidate the casino industry. Fittingly, the two casino REITs - VICI Properties (VICI) and Gaming & Leisure Properties (GLPI) exemplars in shareholder-friendly governance - have been beneficiaries of distress felt across the darker underbelly of the real estate industry, including Blackstone’s non-traded REIT ("NTR") platform. We compiled statistics on all of BREIT's major acquisitions since its inception and examined the performance of the closest comparable public REIT for each of the 14 deals. BREIT paid an average premium of 43% on its deals for publicly-listed companies, and 9 of the 14 deals are currently "in the red" based on public market comparables. We believe BREIT’s interest in the Cosmopolitan and the Bellagio - two of the five "in the money" deals - are among the most likely assets to be sold next.
In addition to the aforementioned reports, we'll hear results this afternoon from cell tower REIT Crown Castle (CCI) and tomorrow morning from net lease REIT Alpine Income (PINE). We'll publish our REIT Earnings Preview later this week. Below, we compiled the earnings calendar for equity REITs and homebuilders. (Note: Companies that have not yet confirmed an earnings date are in italics.)
Additional Headlines from The Daily REITBeat on Income Builder
Braemar Hotels (BHR) finalized an extension of its $51.0 million mortgage loan for the 80-room Hotel Yountville for an additional 6 months
Activist firm Blackwells Capital LLC issued a letter to shareholders regarding the "urgent need for boardroom change" at RTL
Land & Buildings Investment Management issued an open letter to AIV’s Board of Directors urging the company to conduct a "full strategic review"
Mortgage REIT Daily Recap
Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs rebounded today, with residential mREITs gaining 1.0% while commercial mREITs rallied 1.9%. Franklin BSP Realty (FBRT) advanced 2% today after it announced the successful completion of the sale of the Williamsburg Hotel - a Brooklyn property that went into default in early 2021 - for $96 million, enough to cover the full principal amount of its loan and approximately $20 million of additional proceeds. Mortgage REIT earnings season kicks-off next Monday with reports from Dynex Capital (DX), KKR Real Estate (KREF), AGNC Investment (AGNC), and Seven Hills (SEVN).
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