REIT Dividend Hikes • Earnings Recap • New Healthcare REIT

• U.S. equity markets finished lower Friday as investors readjusted expectations for inflation and interest rates following a busy slate of data indicating an uptick in economic activity and persisting price pressures.
• Erasing its gains for the week, the S&P 500 finished lower by 0.3% today - posting declines of 0.2% on the week - while the tech-heavy Nasdaq 100 slipped 0.7%.
• Real estate equities were mixed today as a busy week of earnings wrapped-up with several strong reports and a handful of dividend hikes. Equity REITs and Mortgage REITs each slipped 0.4%.
• Another day, another wave of dividend hikes. Another four REITs announced dividend hikes over the past 24 hours, bringing the full-year total to nearly two-dozen: ExtraSpace (EXR), Elme Communities (ELME), CBL Properties (CBL), and Hannon Armstrong (HASI).
• Healthcare REIT Strawberry Fields (STRW) - which has traded OTC since its direct listing last year - announced it will officially begin trading on the New York Stock Exchange American on Wednesday, February 22, 2023 and will continue to trade under its current symbol.

Income Builder Daily Recap

U.S. equity markets finished lower Friday as investors readjusted expectations for inflation and interest rates following a busy slate of data indicating an uptick in economic activity and persisting price pressures. Erasing its gains for the week, the S&P 500 finished lower by 0.3% today - posting declines of 0.2% on the week - while the tech-heavy Nasdaq 100 slipped 0.7%, but held on to modest weekly gains. The 10-Year Treasury Yield declined 1 basis point to 3.83% after hitting its highest level of the year on Thursday. Real estate equities were mixed today as a busy week of earnings wrapped-up with several strong reports and a handful of dividend hikes. The Equity REIT Index declined 0.4% today with 13-of-18 property sectors in negative territory while the Mortgage REIT Index slipped 0.4% as well.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

Another day, another wave of dividend hikes. Another four REITs announced dividend hikes over the past 24 hours, bringing the full-year total to nearly two-dozen: storage REIT Extra Space (EXR) hiked its quarterly dividend by 8% to $1.62/share; Mall REIT CBL Properties (CBL) hiked its quarterly payout by 50% to $0.375/share; apartment REIT Elme Communities (ELME) raised its dividend by 6% to $0.18/share; and commercial mortgage REIT Hannon Armstrong (HASI) boosted its payout by 5.3% to $0.395/share.

Industrial: Cold storage operator Americold (COLD) rallied nearly 5% after reporting better-than-expected results and providing a positive outlook for 2023 following several challenging years of negative pressures resulting from higher labor costs and lower occupancy rates - one of the only sub-segments of the industrial market that struggled during the pandemic. COLD reported that its full-year FFO declined 3.5% for full-year 2022 - 90 basis points above its prior guidance - and sees relatively strong FFO growth of 7.2% for full-year 2023 and expects same-store NOI growth of 6.6% for the year. COLD commented, "Our core same store pool continues to recover nicely as we saw economic occupancy meaningfully improve and we continue to price to offset inflation. We can expect to see service NOI margins improve as we move towards our optimal perm-to-temp ratio and stabilize our turnover rate."

Data Center: Digital Realty (DLR) slipped 2% after reporting mixed results, noting that its full-year 2022 FFO rose 2.6% - below its prior guidance of 3.0% - and provided a disappointing outlook for 2023 with expectations of flat FFO growth at the midpoint of its range. Leasing volumes were lighter-than-expected with $117M of incremental annualized GAAP rental revenue - down from $176M in the prior quarter - but pricing on renewals was decent with rent increases of 0.8% on a cash basis with particularly strong pricing power on smaller leases below 1MW. While the FFO outlook for 2023 was soft, DLR does expect an upward inflection in property-level fundamentals, projecting same-capital NOI growth of 3-4% for full-year 2023 - a notable improvement from the -5.8% decline in 2022. DLR commented, "we’ve seen this pendulum on pricing moving in our favor now for several quarters... This year [marks] an inflection to positive territory and we’re guiding for 2023 to be the best cash mark-to-market inflection in close to 10 years for our business."

Billboard: Yesterday we published Billboard REITs: We're Paying Attention on the Income Builder marketplace which discussed our updated sector outlook and recent allocations. From the bright lights of Times Square to the iconic signage on LA's Sunset Strip, advertising billboards have been an inescapable fixture of the typical American commute for decades. Billboard REITs own a commanding share of the nation's 500,000 outdoor advertising displays - a surprisingly resilient business that has seen revenues and profitability fully recover to pre-pandemic levels. Unlike other increasingly-cluttered digital formats, there's "only one channel" on the highway and these Billboard REITs are well-positioned to capture the steadily growing share of marketing spending towards Out-of-Home advertising. We like the supply constraints and the importance of scale in the billboard business – granting these REITs a meaningful competitive advantage and legitimate economic moat.

Additional Headlines from The Daily REITBeat on Income Builder

• Healthcare REIT Strawberry Fields (OTCQX:STRW) - which has traded OTC since its direct listing last year - announced it will officially begin trading on the New York Stock Exchange American on Wednesday, February 22, 2023 and will continue to trade under its current symbol.
• Life Storage (LSI) rejected that acquisition proposal by Public Storage on February 5, 2023, stating that it significantly undervalues the Company and its prospects for future growth

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs finished mixed today with residential mREITs slipping 0.1% while commercial mREITs gained 0.2%. Arbor Realty (ABR) rallied more than 4% after reporting strong results, noting that its distributable EPS rose to $0.60 - surpassing the $0.46 average analyst estimate - while its Book Value Per Share ("BVPS") rose 1% to $12.92. Notably, ABR held its dividend steady at $0.40/share, snapping a streak of 10 straight quarters of dividend increases. Hannon Armstrong (HASI) dipped 2% after reporting mixed results, noting that its distributable EPS fell to $0.49 from $0.47 in the prior quarter. HASI became the second mREIT to hike its dividend this year, however, boosting its payout by 5.3% to $0.395/share.

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook this weekend.

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