Market Commentary

Markets ended with little change last week as the FTSE Nareit All Equity REITs index had a total return of -0.6%, reversing the small gains from the prior week. Broad equity markets were down as well, with a -0.3% total return on the Russell 1000.

Due to the highly unusual nature of this recession, uncertainty about the path of the pandemic, and the potential for a robust recovery, in upcoming earnings announcements the management’s view of market conditions and discussion of the outlook are likely to attract at least as much attention as FFO.

Most property sectors recorded small gains to increases in the high single-digits, led by timber REITs (8.3% total return) and specialty REITs (4.4% total return).

Re-openings of the retail sector in many parts of the country in May continue to have a positive economic impact for retail REITs. The other sectors showed little change from June with continued strong rent collections.

REIT share prices declined last week, with the FTSE Nareit All Equity REITs total return index down 2.3%. Most

REITs’ access to capital demonstrates investor confidence in their ability to operate despite difficult economic and financial market conditions.

The high level of jobless claims week after week raised fears that new rounds of layoffs may be spreading from the sectors initially hit by the crisis to the rest of the economy, and perhaps warning of greater damage from the shutdowns.

REITs rebounded last week with a 5.2% total return, according to the FTSE Nareit All Equity REITs index, ending a string of declines over the three prior weeks.

The most visible sign of this lockdown is the collapse of sales transactions, which fell sharply as social distancing rules went into effect.

The impact of the COVID-19 pandemic and economic shutdown has not been spread evenly across the economy or across real estate sectors.

All property sectors of the REIT universe declined last week as a surge in new cases of COVID-19 in many states raised concerns that the economic reopening may be delayed.

The June results show an improvement for most sectors, suggesting that re-openings of the retail sector in many parts of the country in May have had a positive economic impact for retail REITs.