In the U.S.:
- Bloomberg reported that the Treasury Borrowing Advisory Committee (TBAC) is again likely to counsel Treasury Secretary Mnuchin against issuing ultra-long bonds as they would not be sustainable over the long-term. Although Mr. Mnuchin is not bound by the TBAC’s recommendation, he shelved a similar plan in 2017 following TBAC’s analysis.
Piedmont Office Realty Trust (PDM) announced that it has completed the purchase of Galleria 400 and Galleria 600, two office towers totaling approximately 860,000 square feet and an adjacent 10.2 acre land parcel entitled for one million square feet of additional development for a total of $231.2M. The acquisition is located within The Galleria, is a master-planned, mixed-use development in northwest Atlanta.
- The trade war with the US took a more positive turn this week as both sides claimed that talks were constructive. China also indicated that they would not retaliate against the tariff increase announced by the Trump administration last week.
- July industrial production rose a better-than-expected 1.3% m/m versus June’s 3.3% m/m decline. The reading provided some optimism as industrial production had been struggling due to the ongoing China/US trade war.
Shares of Hong Kong developers continued to slide this week as expectations of a prolonged protest grew following the arrest of several protest leaders. Among the hardest hit, shares of Sun Hung Kai Properties Limited have fallen over 14% during the past three months.
- Newly elected UK Prime Minister Boris Johnson decided to suspend parliament as the next Brexit deadline looms on October 31st. By taking this action, PM Johnson has limited the opposition’s options to fight the no deal Brexit scenario.
- August Eurozone headline inflation up 1% y/y in August, which was in line with expectations and unchanged from July’s reading. As expected, the Eurozone unemployment rate held steady at 7.5%.
Berlin focused residential property companies ADO Properties and Deutsche Wohnen saw their share prices rally late in the week on press reports that potential legislation being discussed by the Berlin Senate may not be as severe as feared in recent months, and that any potential new regulations surrounding rent increases would like not take effect in January 2020 to allow more time for discussion of the proposals. News first started leaking back in June of a potential five year rent freeze on residential rents in Berlin and more recently of potential rent caps based upon age of construction. While the goal of politicians proposing the changes was to address the rising rents in Berlin, many landlords argued the such changes, if enacted, would be unconstitutional and only serve to further restrict investment in new housing or capital investment in existing housing. While far from finalized and likely subject to continued political discussion, press reports suggest that rents may not be frozen after all and may allow for moderate increases tied to inflation. Leaked press reports also suggest that the risk of rent caps has been somewhat mitigated by suggesting that rents would only be capped for those tenants that pay 30% or more of their net household income on rent, a suggested offered up by Deutsche Wohnen back in June in response to the initial rumors of a rent freeze.
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.