iREIT Daily

China Isn’t Feeling Well

Brad Thomas

471 postsAugust 23, 2022

Usually, I focus on what’s going on in the U.S. since that’s where I am… that’s where I invest… and that’s what I usually recommend.

However, today we’re turning to China, and with very good reason.

Actually, scratch the word “good.”

Economic growth has slowed across much of the Chinese economy. In Q2, it recorded some of its worst annual growth metrics since the start of Covid. And in July specifically, GDP only expanded 0.4% as industrial production and public and private investments decreased.

China’s youth unemployment rates also reached a new high, with nearly 20% of people aged 16-24 years old searching for work.

To help alleviate some of this economic fallout, China’s central banking mechanism is cutting benchmark interest rates. As The Wall Street Journal reports:

“The People’s Bank of China last week unexpectedly trimmed two of its policy rates in response to slowing growth and feeble demand for credit. Changes to so-called loan prime rates, which are set by a panel of banks and represent the terms offered to the most creditworthy borrowers, usually follow soon after.
“Economists say interest-rate cuts will probably do little to revive growth in China’s flagging economy, where would-be borrowers are on edge over the threat of new disruptions to daily life from any new Covid-19 outbreaks and gloomy about their prospects against a worsening backdrop for growth and jobs. That is sapping demand for loans.”

The fact that China is cutting interest rates speaks to a deep pessimism within its private sector. That’s understandable considering all the lockdowns it’s had to face.

Businesses and individuals alike are afraid to extend their balance sheets… costing production, jobs, and livelihoods.

And when citizens and businesses stop believing in their country’s economic viability, that’s where bigger problems begin.

More Non-REIT News to Know About

Since July, one of America’s largest automakers has been wrestling with the notion of major layoffs. But that fight might be over now.

Ford (F) has been hit with substantial competition lately amidst the electric vehicle (EV) push. With the summer’s incredible energy cost surging, many people are more seriously considering making the switch.

And Ford wants to meet this demand head-on. Though to do so, it says it has to sacrifice human capital.

The car company has just confirmed it will lay off about 3,000 white-collar and contract employees in its product-line transition. Those cuts could begin as soon as this week.

The downsizing will mainly affect employees in the U.S., Canada, and India. But the lion’s share will be salaried jobs at its Dearborn, Michigan, headquarters.

Ford shares fell sharply yesterday on the news of this restructuring, dropping about 5% at opening bell to around $15.12.

The World According to REITs

Today, we’re going to look at Park Hotels & Resorts (PK), an obviously named real estate investment trust.

Park’s diverse portfolio of market-leading hotel and resort properties consists of 49 premium-branded hotels and resorts. They amount to 30,000+ rooms primarily located in prime city centers and resort locations in states like Hawaii, Florida, and California.

This summer, Park crushed it in terms of both portfolio performance and balance sheet strength. With $154 million in net income… a 119% increase in proforma revenue per available room (REVPAR)… and a $121 million improvement in adjusted funds from operations (FFO)…

The resort REIT clearly raked it in.

In each of its key markets, Park was able to maintain high occupancy numbers – up to 90% in Miami, Florida, and 95% in Chicago, Illinois.

It also has a great amount of liquidity, with 1.7 billion in the bank and another $901 million of available capacity under its revolving credit facility.

CEO Thomas J. Baltimore, Jr., had this to say:

“I am extremely excited to see continued demand growth across our portfolio during the second quarter. Leisure demand remains strong in our Hawaii, Florida, and Puerto Rico markets, while business transient and group demand continue to strengthen, helping to drive average rates at our urban hotels above 2019 levels by over 2% and group rates to 2019 levels during the second quarter.
“Additionally, we sold four hotels and our ownership interests in the joint ventures that own and operate one hotel during 2022 for gross proceeds of approximately $268 million and utilized these proceeds to buy back $218 million in stock at a significant discount to our estimated net asset value.”

Better yet, he’s optimistic about the future, seeing further post-Covid recovery through the rest of the year. “… pent-up demand persists across all segments,” he added. “including our current forecast reflecting transient occupancy for the third quarter at nearly 90% of 2019 levels.”

All told, he believes the company is “well-positioned to pivot between defense and offense.” Anything can happen from here, of course, but it’s always nice to see that level of business enthusiasm.

Author’s Note: If you do determine this stock is right for you, make sure to purchase it at a smart entry point. Even the best of companies can burn you badly if you buy in at inflated prices.

Happy Investing

Brad Thomas

471 posts

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Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

The Global Economy Isn’t Looking So Hot

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

China Isn’t Feeling Well

Brad Thomas

471 postsAugust 23, 2022

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China Isn’t Feeling Well

471 postsAugust 23, 2022

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