In the U.S.:
- The White House released a plan for phased economic reopening. The caveat to the plan, was that the ultimate decision to reopen was up to the state governments, a notion that had been challenged by President Trump earlier in the week.
- Initial unemployment claims jumped another 5.2M this week versus last week’s 6.6M. The staggering jump in claims serves as evidence on how the ongoing pandemic is crushing vulnerable businesses unable to open during the crisis.
Hilton Worldwide Holdings (HLT) raised cash by selling $1B of loyalty points to its Hilton Honors program to American Express. In addition, Hilton plans to offer $500M Sr. Notes as the company looks to improve its financial position given the COVID 19 pandemic’s impact on the company.
- GDP suffered the first quarterly contraction on record at -6.8 y/y versus Q4’s 6.0 reading. Statistics bureau highlighted the impact of the coronavirus, though also highlighted that the outbreak has been stopped and operation resumption is accelerating.
- Xinhua reported that the PBOC will continue to channel credit funds into the real economy, especially small businesses, through measures such as targeted reserve requirement ratio (RRR) cuts and refinancing.
- Japan PM Abe expanded the state of emergency to the entire country as the new coronavirus cases continue to rise. The move seeks to minimize people movement during Golden Week which begins 29-Apr through second week of May.
The Singapore government decided to extend the timeline for the city’s REITs to distribute at least 90% of their taxable income to 12 months from three months, they also raised the leverage limit and deferred the implementation of a minimum interest coverage ratio requirement. The moves were implemented to alleviate some of the current cash difficulties caused by the COVID 19 shutdown.
- Following a deadly week in Europe due to the COVID 19 pandemic, both the UK and Spanish government extended lockdown measures for at least three more weeks.
- Over the weekend, OPEC producers agreed to slash global output by 10%. The deal is expected to provide some price relief to US shale producers and also combat the falling demand due to the COVID 19 pandemic.
Dutch office REIT NSI NV provided a 1Q20 trading update this week that mostly reflected operating results prior to the storm of the COVID-19 pandemic hitting global markets in March. EPRA EPS of €0.55/sh was largely in line w/expectations. While EPS was down 3% YOY, it was mostly due to disposals in 2019 as management continued with its rationalization of the portfolio. Gross rents increased 6.6% on a like-for-like basis while EPRA vacancy was largely flat YOY. NSI sold three assets in the period and acquired one asset. At period end the overall vacancy rates stood at 7.4%. The company was in a strong financial position at period end with a LTV of 27.6%, €280 mn of cash and committed undrawn credit lines, no major debt maturities until 2023 and little in the way of committed cap ex requirements. Management did confirm that it will pay its final dividend payment in May relating to its 2019 results, but did elect to withdraw guidance for 2020 due to the coronavirus-related uncertainty. As of April 15th, the company noted that it had received 84.6% for the cash rents (both monthly and quarterly contracts) due in April. It continues to have discussions regarding those tenants that have requested some form of rent relief, which may range from rent delays, rent holidays, early terminations or conversion from quarterly rent payments to monthly rent payments. The company acknowledged that the results for the period reflect little of the potential issues ahead relating to the COVID 19 pandemic, but feel that are in a strong position entering this period of uncertainty.
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.