Vanguard REIT ETF

Last week, Elliott Management filed its 13F for the first quarter of 2020. In the last quarter, the hedge fund’s AUM was worth around $73.15 billion.

With the strength of the labor market faltering, market participants expect the Federal Reserve to take a dovish stance on interest rates. What does this mean for REITs?

Volatility in stocks and bonds shifts investors’ attention from a traditional stock-bond portfolio to another asset class called real assets.

In essence one of the things we have accomplished with these three products is to reduce the volatility inherent in all markets, and in particular very volatile markets like the real asset sectors.

On August 8, Equinix (EQIX) declared a regular quarterly cash dividend of $2.28 per share for the third quarter.

Extra Space’s top-line and bottom-line results have been seeing YoY (year-over-year) growth for the past several quarters.

In 2015, 2016 and 2017, Equinix paid regular cash dividend per share of $6.76, $7.00 and $8.00, respectively.

Equity Residential’s (EQR) second-quarter operating expenses increased at a higher rate than the growth rate of same-store revenues.

RAAX’s allocation process provides exposure to segments with better returns profiles while managing overall portfolio risk.

According to the IMF (International Monetary Fund), the world economy grew 3.8% in 2017, the fastest since 2011.

VanEck The VanEck Vectors Real Asset Allocation ETF (RAAX) uses a data-driven, rules-based process that leverages over 50 indicators (technical, macroeconomic and fundamental, commodity price, and sentiment) to allocate across 12 individual real asset segments in five broad real asset sectors. These objective indicators identify the segments with positive expected returns. Then, using correlation and […]

In a continued effort to deregulate the economy, President Donald Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act.

In the recently concluded first quarter, more than 95% of REITs reported earnings beats and maintained their guidances for 2018.

The real estate sector (VNQ) has been lagging in performance in 2018. It’s seen a year-to-date loss of 6%.

While the US dollar was expected to gain from the growing economy and the rising interest rates, the recent tax cuts have flipped the scenario.

American Tower (AMT) owns and operates over 160,000 communications sites around the world.

Now that we understand the investment process overall, can you give us a few example sectors and how they work?

Now that we understand why the macro environment is supportive, why don’t you tell us a little bit about the investment process?

Building on a legacy in the real asset space, VanEck is soon to debut a new fund, ticker RAAX.

In March, the service sector continued to grow but at a slower pace.

Analysts gave HCP a mean price target of $26.59, implying a significant ~17.0% rise from its current level of $22.68.

HCP has a $2.0 billion credit facility with maturity in 2021, and the majority of its debt matures after 2019.

HCP has indicated that the recently enacted Tax Cut and Jobs Act could materially and adversely affect the company and its stockholders.

In 4Q17, HCP recorded an $84.0 million impairment on the debt investment and reduced the value to $105.0 million.

According to the National Bureau of Economic Data, the first wave of Baby Boomers are expected to turn 75 in 2020.

Rental revenues for HCP increased ~3.0% from $392.0 million in 2016 to $400.0 million in 2017.

Life Science is an 8.0 million square foot portfolio and represents ~25.0% of HCP’s NOI.

For 2017, HCP’s funds from operation stood at $1.95 per share, and its same-store cash NOI growth was 3.4%.

HCP Inc. has a diversified senior housing portfolio, which has a balanced mix of triple net and SHOP (senior housing operating portfolio).

Analysts gave HTA a mean price target of $33.38, implying a significant ~26.0% rise from its current level of $26.30.

HTA has earnings per share of $0.33 and a PE (price-to-earnings) ratio of ~111.0x.

HTA paid dividends of $1.17 in 2015, $1.19 in 2016, and $1.21 in 2017.

In 2017, Healthcare Trust of America (HTA) had total leverage of 29.9%.

HTA has 3.4% combined pro forma same-store NOI growth, and its development assets are currently 86.0% pre-leased.

Healthcare Trust of America (HTA) completed investments of $2.7 billion in 2017, and 90% of these properties are in key strategic markets.

In 2015, US healthcare spending grew 5.8%, and health spending accounted for 17.8% of the nation’s GDP.

Healthcare Trust of America (HTA) has centers in more than 20 key markets in the US, covering 24 million square feet.

Welltower (HCN) announced a dividend of $0.87 per share for 3Q17 from the previous guidance $0.86 in 3Q16. The dividend yield stands at ~5.6%.

Welltower (HCN) has kept its balance sheet in good shape. It has a cash balance of $236 million and $2.6 billion in credit line availability.

Welltower (HCN) increased its SSNOI (same-store net operating income) to 2.5%–3% from 2.25%–3%. This slight increase is due to strong seniors’ housing operating performance.

February WTI crude oil futures contracts also rose 1% to $63.57 per barrel on January 10, 2018. It’s the highest settlement since December 2014.

February US crude oil (UWT) (USL) futures contracts rose 0.5% to $61.73 per barrel on January 8. Prices are near the highest level since December 2014.

EQR reported higher revenues backed by strong growth in rental income.

Since REITs are required to pay 90% of their income as dividends, the tax cuts might reduce their advantage in comparison to other corporations.

EQR announced a quarterly dividend of $0.50. The current dividend yield stands at 3.2%, and it has a payout ratio of 135.2% for 3Q17.

Equity Residential (EQR) has properties in Southern California, San Francisco, New York, Washington DC, Boston, and Seattle.

US crude oil futures contracts for February delivery also rose 0.6% to $62.01 per barrel on January 4, 2018—the highest settlement since December 2014.

Analysts gave SPG a mean price target of $188.10, implying an ~16.0% rise from its current level of $162.26.

Simon Property Group’s capital expenditure increased ~15.0% in 2Q17 while it decreased ~1.2% in 3Q17.

Simon Property Group (SPG) is expected to pay a dividend of $7.15 per share in 2017, an increase of 10.0%. Its portfolio valuation rose 3.9% for 3Q17 on a year-over-year basis.

For October, service sector activity rose at a pace not seen since the inception of the report. The non-manufacturing index reached a lifetime high of 60.1.

CapitaLand Commercial Trust (CCT SP) is a Singapore based real estate investment trust (REIT) that owns 10 office properties in the city’s central business district (CBD).

Revenue and earnings HCP (HCP) is a healthcare REIT specializing in US healthcare property investment. In 2016, the company’s revenue growth slowed to 10% from 19% in 2015. The growth was driven by its senior housing operating portfolio, life science segment, and medical office segment, and partially offset by its senior housing triple-net segment. Rental and […]

The S&P 500 Index (SPY) closed the week ending August 25 at 2,443.05 and rose 0.72%—compared to the close on August 11.

Public Storage (PSA) trades at an EV-to-EBITDA multiple of ~21.5x.

During 1H17, CubeSmart acquired two properties located in Maryland and California worth $21.9 million.

Real estate investment trusts have to distribute ~90% of their profits to investors in order to qualify as an REIT.

Industrial REITs (real estate investment trusts) fund their development and redevelopment properties through debt.

GGP’s (GGP) debt-to-equity was 1.55x for 2Q17, which was higher than the industrial mean of 1.07x. As of 2Q17, GGP had $2.0 billion of liquidity.

Simon Property Group (SPG) had 25 redevelopment expansion projects under construction as of 2Q17.

When we consider the top line performance of commercial REITs, we find that they have performed decently during the second quarter.

Welltower’s current price-to-FFO multiple is 17.34x. It had higher-than-expected results in 2Q17 and has an optimistic outlook for fiscal 2017.

During 2Q17, Equity Residential (EQR) reported higher-than-expected top-line and bottom-line results backed by robust rent growth and occupancy levels.

Equity Residential’s (EQR) top line in 2Q17 surpassed both the year-ago results as well as management’s expectations backed by rent growth.

In this series, we’ll analyze how the top ten dividend-yielding REITs have performed in comparison to the S&P 500.

Equity Residential (EQR) is expected to experience slightly lower margins, mainly due to the higher cost of debt.

Welltower’s (HCN) expected performance in 2017 is reflected in analysts’ ratings for its stock. Analysts have given HCN a mean price target of $72.19.

The price-to-FFO (funds from operations) multiple is the most popular method of valuing real estate investment trusts (or REIT) such as Welltower (HCN).

Healthcare REITs such as Welltower (HCN) have to pay at least 90% of their taxable incomes as shareholder returns in order to function as REITs.

Welltower (HCN) has successfully set itself on a growth trajectory backed by strategic initiatives, aiding its steady top line growth.

The new administration under President Donald Trump has taken a key step toward repealing the Affordable Health Care Act, more popularly known as Obamacare.

Welltower’s (HCN) strategic presences in high-barrier and affluent markets help it to maintain its leadership in the healthcare infrastructure industry.

Amid uncertainty in the healthcare sector, Welltower has been able to maintain its business momentum on the back of higher operating efficiency and strategic initiatives.

The S&P 500 (SPY) defensive sectors tend to offer an attractive yield to investors during low-interest environments or when the economy is slowing down.

General Growth Properties (GGP) has been paying dividends to its shareholders consistently in every quarter since it raised its dividend 11.1% during 4Q16 to $0.22.

GGP reached a debt-to-equity ratio 2.2x in 2014, its highest in the last five years.

President Trump doesn’t appear to be inclined to support a higher minimum wage for workers. This could help retail REITs control their operating expenses, boosting their margins.

Mall owners such as GGP (GGP), Simon Property Group (SPG), DDR (DDR), and Kimco Realty (KIM) are redeveloping their vacant areas that were once occupied by anchor tenants.

During 1Q17, General Growth Properties’ (GGP) occupancy rate (same-store leased percentage) fell to 95.9% from 96.6% in 1Q16.

Despite the belief that US malls are giving way to e-commerce, malls are adapting to consumers’ changing needs. Mall owner GGP (GGP) has been able to maintain its earnings streak since 2012.

Equity Residential’s effective overall borrowing rate for fiscal 2016 was ~4.5%, close to its 2015 level of ~4.6%.

As a part of its strategy initiated in 2005, Equity Residential (EQR) started to sell off its properties to other REITs located in less-dense regions.

The Fed indicated that it could implement two more rate hikes in 2017. The market speculates one of the rate hikes could occur in June, and the other one is expected to occur around December 2017.

In 1Q17, Southern California comprised 25% of Equity Residential’s (EQR) total revenues, 19% of its total revenues came from Washington, D.C., and New York comprised 21% of its total revenues.

On March 31, 2017, Equity Residential (EQR) owned 302 properties in ten states and the District of Columbia, comprising 77,498 apartment units.

Simon Property Group’s current price-to-FFO multiple is ~14.1x.

Analysts gave SPG a mean price target of $202.45, implying an ~25.1% rise from its current level of $161.78.

The hawkish interest rate environment has added to the woes of mall owners like Simon Property (SPG), as well as the REIT industry.

On March 31, 2017, Simon Property Group’s business in the US stood at a hefty figure of 206 properties, including malls, premium outlets, and lifestyle centers.

On April 27, Simon Property Group (SPG) reported 1Q17 earnings per share of $1.53, a 2% beat of the consensus estimate of $1.50.

The rising interest rate is expected to boost the economy in the long run, but it could severely impact sectors like real estate.

Gold and oil are good hedges against inflation. While gold usually outperforms, if inflation rates rise along with interest rates, it might gain as much.

The real estate sector’s (VNQ) (IYR) performance was subdued in 2016 due to its supply-demand dynamics.

HEDGING AGAINST INFLATION  Property stocks and REITs have often been viewed as inflation hedges because expected inflation will affect prices of real estate, and rental income tends to rise along with generalized inflation. However, other factors may mitigate the impact of inflationary forces. Some of these additional factors may include real estate supply and demand […]

COMPARING DIVIDEND YIELDS ACROSS ASSET CLASSES  Since 1999, approximately half of the total return of the Dow Jones U.S. Select REIT Index has come from dividends. During periods of heightened volatility, this income could act as a buffer and may mitigate negative price movements. Historically, the Dow Jones U.S. Select REIT Index has produced higher […]

The Evolution of REITs  The basic concept of REITs originated with the business trusts that were formed in Massachusetts in the mid-19th century, when the wealth created by the industrial revolution led to a demand for real estate investment. The first REIT was set up in 1961, but it took several decades before REITs were […]

To qualify as a REIT, a company must have most of its assets and income tied to real estate investment and must pay out almost all of its taxable income to shareholders in the form of dividends. In the U.S., a REIT must meet the following four requirements. The REIT must distribute at least 90% […]

By Michael Orzano, Director, Global Equity Indices Publicly traded property stocks, including real estate investment trusts (or REITs) and real estate operating companies (or REOCs), allow investors to gain exposure to real estate, which is generally an illiquid asset class, without sacrificing the liquidity benefits of listed equities. They also typically offer higher yields than […]

What about the impact on interest rates? Here again, there is no consistent relationship between spending and interest rates.

Not only do REITs (RWR)(ICF) help diversify a portfolio, but they also bolster portfolio income with their steady dividends and their long-term capital appreciation.