• U.S. equity markets slipped Friday - dragging the major benchmarks to declines of over 3% on the week- after hotter-than-expected Producer Price data snapped a stretch of encouraging inflation data.
• Pushing its declines to 3.3% on the week, the S&P 500 slipped 0.6% today while the Mid-Cap 400 and Small-Cap 600 each declined 1% to push their weekly losses to over 4%.
• Real estate equities were among the better performers today and on the week following another positive slate of REIT dividend news. Equity REITs and Mortgage REITs each finished flat today.
• It was another busy 24 hours of REIT dividend news. Hotel REIT Braemar Hotels (BHR) surged after reinstating its dividend and announcing a stock buyback. Office REIT Douglas Emmett (DEI) rallied despite trimming its dividend but announced a $300M stock buyback program.
• PPI inflation data showed that wholesale prices rose slightly faster than expected in November - a setback following several encouraging inflation reports over the past month but the "internals" of the report were more encouraging.

Income Builder Daily Recap

U.S. equity markets slipped Friday - dragging the major benchmarks to declines of over 3% on the week - after hotter-than-expected Producer Price data snapped a stretch of encouraging inflation data. Pushing its declines to 3.3% on the week, the S&P 500 slipped 0.6% today while the Mid-Cap 400 and Small-Cap 600 declined 1% to push their weekly losses to over 4%. Real estate equities were among the better performers today and on the week following another positive slate of REIT dividend news. The Equity REIT Index finished flat today - and off by 2% on the week - while the Mortgage REIT Index finished flat as well with similar weekly declines.

Ahead of the critical Fed rate decision in the week ahead, closely-watched PPI data showed that wholesale prices rose slightly faster than expected in November - a setback following several encouraging inflation reports over the past month. Core PPI rose 0.4% from last month - above estimates of 0.2% - but the year-over-year growth rate cooled to 6.2% - the lowest annual increase since mid-2021. The "internals" of the report were more encouraging, however, as price inputs further up the supply chain - intermediate demand - were broadly lower in the month. After dipping to three-month lows earlier in the week, the 10-Year Treasury Yield jumped 8 basis points to close at 3.57% today. Crude Oil prices stabilized today - but ended the week lower by nearly 10% on mounting concerns over global economic growth.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

It was another busy 24 hours of REIT dividend news. Hotel REIT Braemar Hotels (BHR) surged more than 10% after it reinstated its quarterly dividend to $0.05/share - still below its pre-pandemic rate of $0.16/share - while also announcing a stock repurchase program of up to $25 million, representing about 10% of its market value. Office REIT Douglas Emmett (DEI) rallied more than 3% despite trimming its quarterly dividend to $0.19/share - down from its prior rate of $0.28 - but concurrently announced a new $300M share buyback program, also representing about 10% of its market value. Ryman Hospitality (RHP) hiked its quarterly dividend by 150% to $0.25/share - but still below its pre-pandemic rate of $0.95/share. W. P. Carey (WPC) - which we own in the REIT Focused Income Portfolio - hiked its quarterly dividend for the fourth time this year to $1.065/share. Lamar Advertising (LAMR) - which we we hold in the REIT Dividend Growth Portfolio held its quarterly dividend steady at $1.20/share but declared a special cash dividend of $0.30 per share.

Single-Family Rentals: Invitation Homes (INVH) announced today that it voluntarily prepaid the $560M balance of its IH 2018-1 securitization which was set to mature in March 2025 by drawing on a new term loan facility that matures in June 2029 which has a variable interest rate based on the term SOFR plus 124 basis points - currently a rate of approximately 4.90%. With the prepayment, INVH's earliest debt maturity is now 2026 and 83% of the Company’s wholly-owned properties are now unencumbered while over 99 percent its debt remains at fixed or swapped to fixed rates. Yesterday we published Single Family Rental REITs: Save The Gloom & Doom which discussed our updated sector outlook and recent portfolio allocations.

Healthcare: Welltower (WELL) rebounded today after several analysts came to its defense following a short report published earlier this week by Hindenburg Research which raised questions over a new joint venture partner on a portfolio of skilled nursing facilities. Last month, WELL announced that it would move 147 Promedica Senior Care skilled nursing assets into a joint venture that will be 15% owned by private equity firm Integra Health. The short report focused on the limited operating history of Integra Health. ProMedica released a statement clarifying Integra’s expected role with the facilities noting that “We are aware that false information about the transaction involving ProMedica’s senior care facilities has been circulating due to an investor opinion piece referenced as a research report,” the statement said. “That opinion piece contains many inaccuracies — the most obvious of which is the fact that Integra is not the proposed operator in this transaction.”

Additional Headlines from The Daily REITBeat on Income Builder

• CSFB upgrades NHI to Neutral from Underperform (raise price target by $11 to $58)
• Raymond James downgrades PEB, XHR to Market Perform from Outperform
• Raymond James downgrades SHO to Underperform from Market Perform
• WSR signed a long-term, 51,000 sf lease with EoS Fitness as the anchor at Williams Trace Plaza center in Sugar Land, TX which replaces an underutilized grocer, and is anticipated to increase traffic to the center, create greater tenant demand for spaces and potentially support the development of a future pad site at the center
• PEI announced meaningful balance sheet improvements through successfully extending its Credit Facilities as they have met all of the requirements to exercise the one-year extension of its first and second lien Credit Facilities and has concluded the extension process where the extended maturity date is December 10, 2023
• Income Builder Members receive access to The Daily REITBeat, an institutional-quality daily note that keeps subscribers apprised of pertinent news, data, and trends specifically within the REIT industry.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mixed today with residential mREITs advancing 0.1% while commercial mREITs slipped 0.1%. Over the past 24 hours, Starwood Property (STWD), Annaly Capital (NLY), AGNC Investment (AGNC), and Redwood Trust (RWT) each held their dividends steady at current rates. Last week, we published Mortgage REITs: High Yields Are Fine, For Now. Mortgage REITs - which were left for dead amid a historically brutal year across fixed-income markets - have rebounded in recent weeks as earnings results were not as catastrophic as feared. Mortgage REITs are now outperforming Equity REITs for the year, and we continue to see value in a modest allocation towards higher-quality mREITs in a balanced income-focused real estate portfolio.

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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