North America
In the U.S.:
- Congress was not able to pass a fifth coronavirus relief package as a wide gap between Republicans and Democrats remained over the size of the package. House Speaker Pelosi said she expects the White House and Republicans to move off their ~$1T figure and get much closer to the ~$3T+ proposed by House Democrats.
- Coronavirus vaccine news dominated the week several candidates getting FDA fast track status and positive study results from both Moderna and Oxford/AstraZeneca’s candidate vaccines.
REIT Focus:
Terreno Realty (TRNO) announced the acquisition of an industrial property in South San Francisco for $6.3M. The property is 100% leased to one tenant.
In China:
- The Financial Times reported that the US is considering putting TikTok’s parent ByteDance on the Commerce Department’s entity list that would effectively prevent Americans from using the popular video app. The move would further raise the already heightened level of trade tensions between China and the US.
- Q2 GDP expanded 3.2% y/y versus Q1’s 6.8% contraction. Industrial production rose 4.8% and car output surged 20.4%, leading the fairly broad-based improvements across all category groups.
In Japan:
- Tokyo registered a record 286 new coronavirus cases Thursday, confirming an earlier announcement from Governor Koike that called for residents to avoid nonessential travel outside Tokyo and refrain from visiting nightlife and dining establishments that have not taken the necessary precautions to prevent the spread.
- As expected, the BoJ left policy unchanged. The updated outlook forecasted a larger contraction of FY20 GDP.
REIT Focus:
Bloomberg reported that Hong Kong mass home prices could recover despite the new security law. The article noted that CK Asset has set prices well above the secondary market to sustain profit margins, with the hope of continued low rates and a market rebound.
Europe
In Europe:
- The ECB left its key policy settings on hold, including its key deposit rate of -0.5%. President Lagarde noted improved market conditions and said in an interview that it could afford to pause after taking so much action since March.
- The UK announced that it would ban Huawei from supplying new equipment to the UK’s 5G networks. The decision was taken after a meeting with the National Security Council (NSC) amid rising pressure from conservatives wary of China’s espionage activities.
REIT Focus:
Dutch office REIT NSI N.V. reported its 1H20 results this week and reinstated its EPS guidance back to the level first proposed with its 2019 results earlier in the year. NSI reported EPS of €1.14/sh, an 8.3% decrease versus a year ago, primarily due to 1H19 disposals. Like-for-like net rents increased +4% YOY while EPRA vacancy ended the year at 7.8%, a 10 bps like-for-like increase YOY. Rent collection for 2Q20 stood at 96% and, adjusted for some waivers and rent restructurings, less than 1% of 2Q rents remain outstanding. Noting that rents are typically paid quarterly in advance, rent collections for 3Q already were over 90% as of July 10th. With the caveat that transaction volume is very limited, the portfolio valuation declined 4.1% in 1H20 per the outside valuation and the EPRA NAV declined 6.6% in 1H20 to €44.79/sh. LTV at the half year was 29.2%, up 1.2% from year end. The company reinstated its original EPS guidance prior to COVID-19 of €2.30 – €2.40/sh with the added comment that they will likely be more towards the low end of the range versus leaning toward the top end of the range pre-COVID. The solid rent collections and improved earnings visibility allowed management to confirm the interim dividend for the year at €1.04/sh , which is flat versus a year ago.
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.