In the U.S.:
- Initial claims ticked up another 2.12M this week versus last week’s 2.45M claims. The new claims bring the total to an alarming 41M since the start of the pandemic.
- Following heightened tensions between the US and China, investors were relieved on Friday that President Trump did not undermine the Phase 1 trade deal and seemed to ratchet down some of the previous rhetoric regarding Hong Kong’s trade exemptions.
Rexford Industrial (REXR) announced the acquisition of 1055 Sandhill Ave., a 158KSF vacant manufacturing building on 5.79 acres of land, in Carson, CA, for $14.5M. Rexford plans to demolish the existing improvements and construct a new, 32-foot clear 126KSF single-tenant logistics building with 20 dock-high loading positions, with 2.7 acres of excess land available for vehicle parking.
- The national security law aimed at giving Beijing new control over Hong Kong has led to a new wave of protests in the region. Further stoking the flames, U.S. Secretary of State Mike Pompeo, notified Congress that the Trump administration may withdraw the preferential trade and financial treatment that the U.S. gives to Hong Kong.
- The WSJ, citing administration officials and others familiar with the matter, reported that President Trump announced today that the US will cancel visas of some Chinese graduate students and researchers. The move would target those associated with Chinese universities with ties to the PLA.
- April unemployment ticked up 2.6% m/m versus March’s 2.5% m/m reading. Although at first glance, Japan’s job market seemed to be weathering the pandemic quite well, a NYT article highlighted that the figures above could be misleading given that they did not include furloughed workers.
City Developments announced that it would furlough approximately 30% of its M&C Unit employees. In addition, City Developments has asked the M&C unit to also permanently reduce global headcount by 8%.
- May Eurozone flash CPI fell to a four year low of 0.1% y/y versus April’s 0.3% reading. The drop in inflation will likely spur the ECB to do more asset purchases next week.
- UK Prime Minister Boris Johnson outlined the reopening guidelines. From Monday, up to six people will be able to meet outside and schools are to gradually reopen as long as social distancing rules are respected.
British Land Company, one of the UK’s largest diversified listed property companies, reported its results this week for FY20 (12-month period ended March 31, 2020). The underlying EPS of 32.7 pence/sh was a decline of 6.3% YOY. EPRA NAV was down 14.5% YOY to 774 pence/sh with the portfolio valuation down 10.1% YOY (-26.1% for retail and +2.3% for offices). While the results for the FY ended up largely as expected with office relatively stable and retail previously showing weakness, the real focus for investors is on the outlook for the year ahead since the initial impacts from the pandemic were limited to the tail end of March. March rent collections for the upcoming first quarter of the next FY21 were 68% overall – 97% for offices and 43% for retail with smaller retail, food & beverage and leisure tenants experiencing the greatest initial distress from the pandemic induced shutdowns in March. Management expects the initial outlook for the year ahead to remain uncertain as a result of the COVID-19 crisis, but believes its strong balance sheet (LTV of 34%) and portfolio quality will enable them to weather the current climate. While encouraged by current discussion with office occupiers, demand is expected to be somewhat slower and difficult to predict as occupiers sort out short term and long term needs. Retail tenants are likely to continue to be pressured by the gradual easing of lockdowns and the pandemic’s impact on social behavior, as well as the continued shift by consumers to greater online shopping.
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.