In the U.S.:
- Initial jobless claims of 2.438M versus last week’s upwardly-revised 2.687M. Brings total claims to nearly 39M over past nine weeks. Continuing claims of 25.073M a bit above estimates of 24.500M, up from prior week’s 22.548M.
- In earnings, 478 companies in the S&P 500 Index have reported, 66.2% beat, 0.5% were in-line, and 33.3% missed estimates.
Citing the uncertainty regarding the COVID-19 pandemic, Ryman Hospitality Properties announced the termination of its agreement with Stratus Properties (STRS) to purchase the Block 21 mixed-use development in Austin, Texas. As a result of the termination, Ryman will forfeit its nonrefundable deposit of $15M provided to Stratus in connection with the execution of the agreement.
In REIT earnings, 101 companies in the Wilshire U.S. REIT Index have reported, 57 beat, 3 were inline, and 41 missed estimates.
- Premier Li Keqiang acknowledged that China has scrapped their 2020 growth target. Premier Li cited great uncertainty regarding the COVID-19 pandemic and the world economic and trade environment.
- Bloomberg reported that China will move to safeguard national security in Hong Kong and vowed to push ahead with plans to integrate city with southern China. The move sent the Hong Kong markets sharply lower as tensions slated to rise sharply.
- Q1 GDP fell an additional 3.4% y/y versus Q4’s 7.3% y/y drop. The drop puts the Japanese economy into a technical recession and highlights the need for urgent action to prevent the COVID-19 pandemic from further disrupting the economy.
- As expected, the BOJ left policy rates and QE settings unchanged. Reiterated the Bank will closely monitor the impact of COVID-19 for the time being and will not hesitate to take additional easing measures if necessary.
Beijing’s surprise plan to impose a national security law is spurring a new round of selling of Hong Kong developers. One of the hardest hit, was Wharf Real Estate Investment Co., which plunged by over 9% on Friday.
- May Eurozone flash composite PMI rebounded to a three-month high of 30.5 versus April’s 13.6 reading. Manufacturing PMI improved to 39.5 from 33.4 and services PMI improved to 28.7 from 12.0.
- The Financial Times reported that UK banks have raised concerns over prospect of negative rates, warning it would slash earnings and limit ability to absorb coronavirus-related loan losses. The FT highlighted BoA analysis estimating that a BoE cut to -0.25% would depress the banking sector’s average RoE into low-to-single digits.
London office specialist Great Portland Estates reported results this week for the FY ended March 31, 2020. Results for the period were broadly in-line with expectations since the lockdown in London and the UK as a result of the COVID pandemic did not occur until late in March and had little impact on results. EPRA EPS increased 22% YOY to 22.0 pence/sh and EPRA NAV increased 1.8% to 868 pence/sh with office (80% of portfolio) values up 1.0% YOY and retail (20% of portfolio) values down 3.5%. Management acknowledged that economic outlook as a result of the pandemic and implications on their business has shifted dramatically and created much uncertainty, but expressed confidence that they are in a strong financial position to weather the more challenging environment with significant liquidity and an LTV of 14%.2 % at period end. Rent collections for the quarter that began April 1 were at 71.0% with tenants applying a portion of security deposits or temporarily converting to monthly rent payments taking the total up to 83.0% and another 11.3% agreeing to deferred rent payments. Not unsurprisingly, the greatest portion of tenants having rent payment issues were those in the retail, hospitality & leisure sector. They remain actively engaged with their tenants to address rent collection issues. Lastly, management reiterated the importance of sustainability and committed to become a net zero carbon business by 2030.
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.