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ONE BIG THING

Crash! Hudson Pacific Properties Suspends Its Common Stock Dividend

What: On September 10, Hudson Pacific Properties announced its Board of Directors suspended its third-quarter common stock dividend, saying it was “to preserve capital in an ongoing challenging environment.” It did, however, declare a $0.296875 dividend on its Series C Cumulative Preferred stock, which will be paid to shareholders of record on September 20.

On September 11, Wells Fargo lowered the price target on Hudson Pacific from $5.00 to $4.50.

Who: Hudson Pacific Properties Inc (NYSE: HPP) is a Los Angeles, CA-based Office REIT with 41 office properties and 3 motion picture studio properties, emphasizing innovation for media and tech companies in California, Washington state and Vancouver, British Columbia.

Why: The Board of Directors states it will continue to monitor Hudson Pacific’s financial performance and operations to determine when it will be appropriate to reinstate the quarterly common stock dividend.

Hudson Pacific has had serious problems since December 2023 and even before the dividend announcement, its share price had dropped nearly 45%. The strike by the actors and writers guilds in 2023 was crippling. It recently announced Q3 FFO guidance of $0.08-$0.12 per share which was below expectations. Q2 FFO of $0.16 per share declined from Q2 2023 FFO of $0.29. Average office occupancy has fallen from 85.2% to 78.7% year-over-year, with little to suggest that the California or Seattle office markets will improve soon.

Takeaway: Ironically, Hudson Pacific Properties was one of the top-performing REITs in July, with a 27% gain. However, the August stock chart looks more like a roller coaster, with Hudson losing 14.02% for the month. By noon on Tuesday morning, the stock was down 7.35% and at its low for the day. Dividend cuts are short-term painful but are designed to be long-term curative to a company. Investors considering a purchase should have ample time to wait, as Hudson Pacific is apt to be in the doldrums for a long time.

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REIT Roundup

Phillips Edison & Co Inc (Nasdaq: PECO) September 9, announced that Moody’s Ratings upgraded its issuer credit rating for PECO to “Baa2” from “Baa3” with a stable outlook.

Realty Income Corp (NYSE: O) September 10, announced an increase to its dividend from $0.2630 per share to $0.2635 per share, payable on October 15 to shareholders of record as of October 1. The annualized dividend increases from $3.156 per share to $3.162. This is Realty Income’s 127th dividend increase since its IPO in 1994.

Medical Properties Trust Inc (NYSE: MPW) September 11, announced it reached a settlement agreement with Steward Health Care System, its secured lenders and the Unsecured Creditors Committee to restore Medical Properties’ control over its properties, sever its relationship with Steward and transition the operations at its facilities to replacement operators at 15 U.S. hospitals.

Gaming And Leisure Properties Inc (Nasdaq: GLPI) September 11, announced it closed on its $250 million acquisition from Blue Owl Capital on the land where Bally’s Corp (NYSE: BALY) Chicago Casino will be constructed.

Kimco Realty Corp (NYSE: KIM) On September 12, S&P Upgraded Kimco Realty’s rating outlook from “Stable” to “Positive” and affirmed its “BBB+” Issuer Credit Rating.

Upgrades

Equity Residential (NYSE: EQR) On September 10, Deutsche Bank analyst Derek Johnston upgraded Equity Residential from Hold to Buy and raised the price target by 33.8% from $62 to $83.

Downgrades

Camden Property Trust (NYSE: CPT) September 9, RBC Capital analyst Brad Heffern downgraded Camden Property Trust from Outperform to Sector Perform and announced a $122 price target.

Invitation Homes Inc (NYSE: INVH) September 9, RBC Capital analyst Brad Heffern downgraded Invitation Homes from Outperform to Sector Perform and lowered the price target from $37 to $36.

National Storage Affiliates Trust (NYSE: NSA) On September 9, Keybanc analyst Todd Thomas downgraded National Storage from Overweight to Sector Weight.

Simon Property Group Inc (NYSE: SPG) On September 12, Stifel analyst Simon Yarmak downgraded Simon Property Group from Buy to Hold but raised the price target from $157.50 to $159.

Insider Transactions:

Cousins Properties Inc (NYSE: CUZ) On September 11, Senior VP, Jeffrey Symes, sold 5,997 shares of company common stock for $168,695.

Equinix Inc (Nasdaq: EQIX) On September 10, two company insiders, Executive VP Scott Crenshaw and Earl Michael Campbell, Chief Sales Officer were heavy sellers of company common stock. Mr. Crenshaw sold $902,000 and Mr. Campbell sold 600 shares worth $490,000.

Federal Realty Investment Trust (NYSE: FRT) On September 9, Donald Wood, CEO of Federal Realty Investment Trust sold 36,929 shares of company common stock for $4,292,087.

Tanger Inc (NYSE: SKT) On September 11, Leslie Gallardo Swanson, Executive VP sold 17,900 shares of company common stock, in a sale worth $550,246.

Rexford Industrial Realty Inc (NYSE: REXR) On September 11, Laura E. Clark, CFO at Rexford Industrial Realty, sold 14,185 shares of company common stock for a total of $711,342.

Winners & Losers

📈 Biggest Winners This Week: Office and Diversified REITs

• Digital Bridge Group Inc (NYSE: DBRG) Up 13.24%

• Medical Properties Trust Inc (NYSE: MPW) Up 11.86%

• SL Green Realty Corp (NYSE: SLG) Up 8.26%

• Peakstone Realty Trust (NYSE: PKST) Up 6.69%

• Macerich Co (NYSE: MAC) Up 6.36%

• Vornado Realty Trust (NYSE: VNO) Up 6.10%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Up 5.81%

• Iron Mountain Inc (NYSE: IRM) Up 5.61%

• Digital Realty Trust Inc (NYSE: DLR) Up 5.57%

📉 Biggest Losers This Week: Hotel REITs

• Hudson Pacific Properties Inc (NYSE: HPP) Down 4.41%

• Invitation Homes Inc (NYSE: INVH) Down 3.78%

• Park Hotels & Resorts Inc (NYSE: PK) Down 3.71%

• Centerspace (NYSE: CSR) Down 3.57%

• Alpine Income Property Trust Inc (NYSE: PINE) Down 3.25%

• Lexington Industrial Trust (NYSE: LXP) Down 3.04%

• Acres Commercial Realty Corp (NYSE: ACR) Down 3.00%

ONE FOR THE ROAD

July Foreclosures Up 15% From June: Start Of A New Trend?

What: ATTOM Data Solutions recently released its U.S. Foreclosure Market Report for July, and there were 31,929 U.S. properties with foreclosure filings default notices, scheduled auctions, or bank repossessions. This figure was 15% higher than June’s number.

Who: Delaware, Nevada and Utah were the states with the highest foreclosure filing rates. New Jersey and Illinois were the next two states with the most. However, California, Florida, Texas, Illinois and New York had the most foreclosure starts.

A foreclosure filing occurs when a lender files a lawsuit in court to win the right to sell the mortgaged property at auction. A foreclosure start is when the lender takes action to recover the amount owed on the defaulted loan by sending a notice of default to the borrower, accelerating the loan, or calling it due.

Foreclosure completion numbers also increased 14% from June as lenders repossessed 3,282 U.S. properties in July. The states with the most completed foreclosures were New York, California, Illinois, Pennsylvania and Michigan.

Why: The interesting question is, with all the equity increases in real estate over the last three years, why couldn’t the owners sell the home to avoid losing it to foreclosure? The answer is complicated. Sometimes it’s due to mental illness, drug or alcohol addiction, a bad divorce where spouses won’t cooperate, or just waiting too long to act. Homes are not selling as quickly as they did a few years ago due to the higher interest rates and home prices.

How: The Consumer Financial Protection Bureau has proposed some rules to require loan servicers to help borrowers before foreclosing, reduce paperwork requirements and improve communications with the homeowner. Options include temporarily pausing payments or extending the loan term to lower monthly payments. If the borrower requests help, the loan servicer will be mandated to help them before initiating a foreclosure.

Takeaway: Is the upswing in foreclosures the start of a new trend or just a one-month phenomenon? Although the numbers jumped from June to July, there was only a 0.2% increase year-over-year. This might suggest it’s just a one-month quirk. With the significant amount of equity in American homes, any interest rate cuts or price declines should make it easier for people to sell their homes - assuming they really want to.