In the U.S.:
- Coronavirus trends continued to strengthen this week with US cases down nearly 80% over the last six weeks. Bloomberg noted that the number of vaccine doses delivered in the US should rise from the current pace of 10-15M a week to nearly 20M a week in March, more than 25M a week in April and May, and over 30M a week by June.
- There was very little new news concerning the $1.5T+ coronavirus relief package. The stimulus is expected to pass via budget reconciliation sometime around mid-March.
SL Green Realty entered a contract to sell its 25.0% interest in the commercial condominium units located at 55 West 46th Street to a Brookfield Asset Management (BAM) real estate fund. The transaction is expected to close during Q1 of 2021 and generate net cash proceeds to the company of ~$20.0M.
- The Financial Times reported that China is looking to potentially hurt US defense contractors by limiting exports of rare earths crucial for manufacture of sophisticated weaponry including its F-35 aircraft. Said government officials had asked industry executives how badly companies in EU and US, including defense contractors, would be affected if China included rare earths in a bilateral dispute.
- A global semiconductor shortage has affected several industries slowing production of autos, computers, and telecom equipment. The pandemic saw a record increase in chip demand while trading tensions with China, which houses two of the largest semiconductor manufacturers, has hampered efforts to ramp up production.
- February flash manufacturing PMI was 50.6 versus last month’s 49.8 reading. As the pandemic outlook seemed to be getting better, both output and exports turned positive, leading to stronger growth in aggregate new orders.
- Q4 GDP expanded at 12.7% q/q versus last quarter’s revised 22.7% reading. Main surprise factor was private non-residential investment, up 4.5% q/q vs consensus 2.6%. marking a stronger than expected rebound following two straight declines.
City Champion Investments Ltd., a unit of CK Asset Holdings, won the tender for a site in Kai Tak, Kowloon, on a 50-year land grant with a ~HK$10.3B offer. The site has an area of about 10,948 sq. m and is designated for non-industrial purposes
- Improving coronavirus trends were cited as the biggest tailwind for European stocks this week. Of note, the UK is seeing a significant leveling off, allowing the government to lay a pathway out of the current lockdown.
- Italian Premier Draghi won two confidence votes in the Senate and the Chamber of Deputies after outlining his government policy agenda. As expected, Draghi received strong backing given him the widest possible mandate to steer Italy through the coronavirus pandemic and shape its recovery.
Gecina SA reported its 2020 FY results this week with recurrent net income of €5.72/sh. that was slightly ahead of expectations. Like-for-like gross rental income increased 2.3% for the year with offices +3.0%, traditional residential +0.9% and student housing +6.0%. Approximately 84% of GRI is in French offices with the greatest concentration in the Paris CBD and surrounding metro. While officing leasing volume was down for the year like in many markets around the globe, rents held steady with rents signed during the year +2.0% versus pre-crisis estimated market rents per management commentary. Management also indicated that it seen a significant upturn in interest for commercial leasing since September 2020. Approximately 99% of rents for 2020 have been collected and rent collection for the first quarter of 2021 is to date in line with past trends observed. The portfolio value declined only -0.1% for the year on a LFL basis, while EPRA NTA declined 1.7% to €173.10/sh. The year-end LTV was at approximately 34%. Management indicated that it was proposing a dividend of €5.30/sh. for 2020 at its upcoming AGM with half to be paid in cash in March and the remainder in July. The full dividend would equate to a yield of approximately 4.5%. Lastly, management indicated that 2021 will be a transition year with net recurrent income to decline to €5.30/sh., which is well below consensus estimates of €5.61/sh. Per management commentary, the decline reflects the impact of 2020 dispositions, assets taken out of service for redevelopment, a slowdown in indexation in 2021 and an extended leasing timeframe because of the pandemic. While optimism is on the rise for many with the rollout of vaccinations and declining infections, the benefits will take time to get us back closer to normality and 2021 will likely be a transitional year for many. With the stock trading at less than €120/sh. it would seem expectations were low, but markets can be impatient at times.
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.