In the U.S.:
- The public impeachment inquiry kicked off this week with little surprises. As expected, House Republicans continued to defend the President as Democrats laid the groundwork for the inquiry with several non-direct witnesses into the allegations of a quid pro quo in Ukraine.
- In earnings, 462 companies in the S&P 500 Index have reported, 79.0% beat, 0.7% were in-line, and 20.3% missed estimates.
Welltower (WELL) announced a definitive agreement to acquire a 29-property Class-A medical office building portfolio from Hammes Partners for $787M.These acquisitions will contribute 450 properties and over 8M square feet to the company’s platform, as it continues to expand through accretive off-market acquisitions.
In REIT earnings, 102 companies in the Wilshire U.S. REIT Index have reported, 73 beat, 3 were in-line, and 26 missed estimates.
- Rhetoric this week regarding a phase one deal with the US leaned negative as the White House expressed frustration with the amount of concessions China was making to secure a reduction in tariffs. Although the headlines leaned negative, both sides reiterated their willingness to come to a deal in the near term.
- Hong Kong Protests escalated this week with several violent clashes. On Friday, protesters were further angered as the Hong Kong government took the unprecedented step of warning 180,000 employees that they will face immediate suspension and other disciplinary action if they were caught engaging in the protests.
- Q3 preliminary GDP was 0.1% q/q versus Q2’s 0.4% q/q reading. The stalling GDP, primarily led by falling foreign demand due to the China -US trade war, is widely expected to fall into a contractionary territory in Q4 as domestic demand is expected to fall as well.
Mitsubishi Estate announced the purchase of the London Television Centre from ITV for GBP145.6M. The deal is expected to close by the end of November.
- Germany narrowly avoided a recession with Q3 GDP growth of 0.1% q/q versus Q2’s -0.2 q/q reading. Although the slight expansion avoided recession, the underlying slump in manufacturing and global demand continued to weigh on the economy.
Deutsche Wohnen, Germany’s second largest listed residential property company, reported its interim results for the 9-months ending September 30, 2019. FFO I of €1.16/sh for the period was an increase of 11.5% YOY. FFO II, which includes disposals, of €1.23/sh was an increase of 15% YOY. Like-for-like rental growth was +3.4% (+3.6% in Berlin). Approximately 70% of Deutsche Wohnen’s portfolio is located in Berlin. With the proposed Berlin rental freeze (Mietendeckel) expected to become law in 1Q20, management attempted to quantify the cash flow risk for the proposed legislation, suggesting an estimated €330 mn cash flow risk over the 5-year period that it would likely be in effect unless it is overturned sooner. Management was clear in stating its belief that the proposed legislation will in the end be proven to be unconstitutional and that it would do little to help solve Berlin’s housing shortage. Management was also clear in its desire to continue to have an open dialogue with representatives from all sides of the debate in order to better shape the future of the Berlin housing market. Lastly, the company announced a €750 mn share repurchase program (approximately 7% of its shares) that would be funded with asset sales on a leverage neutral basis.
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.