In the U.S.:
- Weekly initial jobless claims were 1.542M versus the revised 1.897M from the prior week. Continuing claims for the week ending 30-May were lower at 20.929M versus the prior week’s 21.268M reading.
- In an interview on CNBC, Treasury Secretary Mnuchin cautioned that shuttering the economy again in the event of a second Covid-19 wave is not a viable option, arguing it would create more damage. He added that he is prepared to return to Congress to discuss additional relief measures, though he stressed another $1T will be pumped into the economy over the next month.
- As expected, the Fed left monetary policy unchanged. Fed said it will buy Treasuries at around $80B/m and MBS at approx. $40B/m to sustain smooth market functioning.
Taubman Centers, Inc. (TCO) confirmed the news that Simon Property Group, Inc. (SPG) had delivered a notice purporting to terminate the previously announced agreement and Plan of Merger among Simon, Taubman, The Taubman Realty Group Limited Partnership and other parties. Simon stated that Taubman had “failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures.”
- May PPI was down 3.7% y/y versus April’s 3.1% drop. Deterioration was broadly based with sharp drops in mining and raw materials.
- Q1 GDP was revised to a small contraction of -0.60 q/q versus the previously reported -0.90% reading. The main factor was non-residential private investment, which turned positive on the back of growth shown in the MOF corporate survey.
- Talks are underway this month to potentially lift quarantine measures for business travelers from Thailand, Vietnam, Australia, and New Zealand. The move follows other countries, like Singapore, that have eased similar travel restrictions for business travelers.
CapitaLand will provide additional support to its qualifying small and medium enterprise tenants, which is in accordance with a proposed bill in parliament aimed at providing rental relief. CapitaLand will waive and potentially defer rent, the timing and payment of which is dependent on the assessment and eligibility of its SME tenants.
- The ECB’s Lagarde said crisis-related measures are temporary, targeted and proportionate and that PEPP is the most appropriate tool to step up monetary impulse. Lagarde added that the risk of a financial crisis has receded since March.
- Germany April Industrial Production -17.9% m/m versus March’s -9.2% reading. The auto sector continued to be the largest detractor.
UK listed SEGRO Plc provided a trading update this week ahead of announcing a £650 mn secondary equity offering to fund continued growth in acquisitions (both land and property) and development. Management indicated that it expects to be able to invest more than £1 bn of capital in developments and land acquisitions through 2021, including more than £600 mn this year. This does not include a recent £203 mn acquisition in West London. The equity placement was upsized to £680 mn and priced at 820 pence/sh, a 4.5% discount to the prior close and a 16% premium to its YE19 EPRA NAV. Operationally the company indicated it has experienced leasing momentum ahead of pre-COVID expectations with releasing spreads +13% so far in 2020 and £4 mn of development pre-lets secured since mid-March. Cash rent collections for the second quarter as of 5/31/20 were 82% overall (83% in UK and 79% in EU), keeping in mind that rents are typically paid quarterly in advance in the UK and monthly in advance in Continental Europe. Of the quarterly rent that has not yet been paid, approximately 16% has been deferred or reprofiled to monthly payments and 2% remaining unpaid and not currently subject to deferment negotiations. SEGRO current development pipeline is expected 74% pre-let and expected to yield 6.5% upon completion and stabilization. Overall leverage should drop into the low 20’s as a result of the offering and gradually rise over the next 18 months as proceeds are deployed.
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.