Public CRE markets welcome Trump win – with some exceptions

The past 24 hours were sobering for professional seers. First Donald Trump’s surprise victory rubbished the prediction that no presidential candidate could win with a platform like his.

And then, global stock and bond markets proved all who predicted a Trump victory would lead to immediate financial turmoil wrong. The S&P 500 stock index and 10-year treasury yields both rose over the course of Wednesday, indicating that markets weren’t too spooked about a future Trump administration. Among real estate firms, however, the reaction was mixed.

Office REITs with a heavy New York focus did well after an initial dip in the morning. SL Green Realty’s stock was up 1.3 percent for the day. Vornado [TRDataCustom], whose CEO Steve Roth is visited as one of Trump’s economic advisers, saw its stock rise 1.19 percent.

“I’d say overall it’s positive for real estate just because you have someone in office who is in the industry,” said Sandler O’Neill analyst Alexendar Goldfarb, adding that a Trump victory likely means the 1031 tax exchange is no longer likely to be scrapped.

Hotel REITs also rose Wednesday, while private-prison REITs saw their share prices shoot up. In August, the U.S. Justice Department announced that it would end the use of private prisons, sending shares into a dive. Investors evidently believe Trump will be more open to continuing the experiment. GEO Group, a Florida-based public company specializing in private-prison facilities, saw its stock price rise 21.27 percent Wednesday.

The two largest public real estate brokerage and services firms also saw their stocks rise slightly, with CBRE climbing 0.85 percent and JLL rising 0.64 percent.

Vector Group, the holding company run by Trump confidante Howard Lorber, saw its stock inch up by 0.33 percent.

But not all REITs did well. “Anything that’s got global in it was probably hurt today” because of concerns about the future of global trade under a Trump administration, Goldfarb said. The stock of global industrial REIT Prologis fell 4.84 percent, while Brookfield Asset Management’s stock fell fell 1.02 percent. Somewhat puzzling is the lackluster performance of major apartment REITs: Equity Residential fell 2.03 percent and AvalonBay fell 1.92 percent.

Another piece of bad news for the real estate industry was the yield on 10-year Treasury bonds, which saw their biggest one-day jump in three years by 20 basis point to 2.07 percent. Although generally a bullish sign for the economy, higher treasury yields tend to push up the cost of debt and put downward pressure on cap rates and real estate prices.

The fallout from Trump’s election on Israel’s market was negligible, which should be reassuring for American real estate companies with Israeli investors.

The Tel Aviv market opened down by 2 percent as news of Trump’s election victory became apparent, but ended the day with a 1 percent increase. The rally was largely due to Israel’s pharmaceutical sector, which had been threatened by Hillary’s campaign promises of increased regulation; several of the largest pharmaceutical companies saw their share prices spike throughout the day.

Chava Gourarie contributed reporting.