In the U.S.:
- Reuters highlighted comments from Fed Chair Powell, who said signs of upward pressure on inflation appeared muted despite a tight labor market. Powell noted that productivity had shown signs of improvement which could help to allow wages to increase without adding to inflationary pressures.
- In earnings, 485 companies in the S&P 500 Index have reported, 71.5% beat, 1.3% were in-line, and 27.2% missed estimates.
Tesla, Inc. (TSLA) reported that it planned to cut costs by closing most retail store locations and that it was shifting to an online only sales model. The news could be viewed as a negative for Mall REITs such as Macerich Company (MAC), Simon Property Group (SPG), and Taubman Centers, Inc. (TCO), which will likely see lower sales per sq. ft. figures for the Tesla exposed malls.
In REIT earnings, 105 companies in the Wilshire U.S. REIT Index have reported, 61 beat, 4 were in-line, and 40 missed estimates.
- Bloomberg reported that US officials are preparing a final trade deal for Trump and Xi to sign potentially as soon as mid-March. White House adviser Larry Kudlow told Fox Business that the two countries were on the verge of a “historic” pact that will see Beijing commit to reducing SOE subsidies and disclose when the PBoC is intervening in FX.
- February Caixin manufacturing PMI increased to 49.9 versus January’s 48.3 reading. New orders returned to expansion territory while export orders were negative, implying a bounce in domestic demand.
- February final manufacturing PMI was 48.9 versus January’s revised 50.3 reading. The drop in PMI was the fastest pace of decline in two and a half years and highlighted the effects that the China/US trade war is having on Japanese export demand.
CapitaLand launched the first discretionary real estate debt fund focused on China, named CREDO I China. The Fund will focus on U.S. dollar denominated loans and securities backing commercial, retail, residential, logistics and industrial properties in China’s first and second tier cities.
- The Trump administration submitted an 18 page document highlighting its goals for a free trade deal with the UK. The document highlights major concessions in regards to the removal of trade barriers to US exports, mainly agricultural products, and takes a tough line on the trading relationship between the UK and China. The trade outline is a blow to Brexit supporters that thought that they could quickly strike a favorable deal with the US after leaving the EU.
UK student accommodation REIT Unite Group reported another successful year of operating results this week. EPRA EPS for the year ended 12/31/18 increased 13% YOY to 34.1 pence/sh. EPRA NAV/sh increased 10% to 790 pence/sh. The operating portfolio was 98% leased for the 2018/19 academic year with +3.2% rental growth. Unite reported that it is 75% reserved for the upcoming 2019/20 academic year, in line with the prior academic year, and that it was confident in its outlook for rent growth to be in the range of 3.0% – 3.5%. Investor interest in the UK student accommodation sector remains healthy, notwithstanding the uncertainties associated with Brexit, with over £3 billion of assets trading in 2018. Unite continues to create value through its development activities with 908 beds (at Unite share) under construction at a total estimated cost of £705 million and a yield on cost of ≈ 7.0%. Unite’s operating portfolio was valued at a yield of 5.0% as of year-end 2018. Unite enjoys a favorable cost of capital and a solid balance sheet (LTV ≈ 29%) that provides significant flexibility to fund its future growth.
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.