In the U.S.:
- December U.S. retail sales unexpectedly fell 1.2% versus November’s revised 0.1% gain. The sharp drop was the largest in more than 9 years and could factor into Fed’s future rate decisions.
Amazon.com, Inc. (AMZN) officially withdrew its plans to build a headquarters in New York. Wells Fargo noted that the decision would have little direct effect on NYC focused office REITs.
- January CPI was up 1.7% y/y versus December’s 1.9% y/y reading. A sharp drop in food prices was cited as the main catalyst to the drop.
- January PPI was up 0.1% y/y versus December’s 0.9% y/y increase. The drop in PPI marked the seventh straight month of slowing factory gate inflation.
- As trade negotiations with the US continue, the WSJ reported that China is pledging to increase U.S. semiconductor sales as a way to appease Washington.
- Q4 GDP grew 1.4% versus Q3’s revised 2.6% contraction. The data was disappointing as a sharper recovery was expected following Q3’s natural disaster plagued quarter. Weak demand from China, due to the ongoing trade war with the US, continued to be the main detractor to GDP.
Link REIT announced the purchase of the CENTRALWALK shopping mall in the Futian district of Shenzhen for 5.1B Yuan. The mall has retail area of about 83,900 sq. m. and 741 car park spaces.
- British lawmakers voted down PM Theresa May’s unwavering approach to Brexit talks. It marked another defeat for a Theresa May, who is battling to overcome deep parliamentary divisions ahead of the looming March 29th Brexit deadline.
- Germany narrowly avoided a recession by posting zero growth in Q4 following Q3’s 0.2% contraction. Weak trade and subdued consumer spending continued to weight down growth.
Global shopping center Unibail-Rodamco-Westfield (URW) reported its 2H18 and FY18 results this week, while also providing its initial outlook for 2019. Adjusted Recurring per Stapled Share (AREPS) of €12.92/sh was in line with expectations. Core operating metrics for URW’s Continental European portfolio appeared to be holding up reasonably well, while metrics in the US and UK appeared a bit weaker. Like-for-like rental growth for the retail portfolio was +4.0% in Continental Europe and +2.5% overall when including the US and UK. EPRA NNNAV/sh ended the year at €210.80/sh, an increase of 5.1% YOY. URW introduced 2019 guidance for AREPS of €11.80/sh – €12.00/sh with the MP of €11.90/sh well below expectations and representing an ≈ 8% YOY decline. Significantly higher projected dispositions in the coming years to refine the portfolio and reduce leverage was a key driver of lower than expected outlook for 2019. Since completion of the merger with Westfield Corp. in June of last year, URW has disposed of ≈ €2 bn of the planned €3 bn of disposals, both ahead of June 30 book values and ahead of the original time frame that had been estimated. URW now plans to dispose of an additional €3 bn of assets in the next few years to €6 bn. At year end the total portfolio was valued at ≈ €65 bn. URW also has also revised its targeted leverage range from 35% – 45% to a new range of 30% – 40%. At year end the LTV was ≈ 37%. While highly dilutive to earnings in the near term as it resets the bar for future earnings growth, the steps taken are likely to be better for investors over the long term.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.