Gapping up
In reaction to earnings/guidance:
- MDB +25.6%, THO +4.8%, GWRE +4.4%, CPB +2.3%
Other news:
- RXDX +191.2% (Results for PRA023 in Both ARTEMIS-UC Phase 2 and APOLLO-CD Phase 2a Studies)
- REPL +37.6% (enters into clinical collaboration agreement with Roche (RHHBY) for the development of RP3 in colorectal cancer and hepatocellular carcinoma)
- IVVD +3.1% (appoints new COO)
- AXON +0.9% (prices offering of $600 mln of 0.50% Convertible Senior Notes due 2027)
Blackstone’s plan to juice BREIT
Basically, aggressively ratchet up rents and restart evictions
The crown jewel in Steven Schwarzman’s real estate investment empire — the $70bn Blackstone Real Estate Income Trust — has hit a spot of bother lately. But its executives think they know how to get it back on track.
Nadeem Meghji, head of Americas real estate at Blackstone, this week made an appearance on “BX TV”, the company’s Monday morning global video call for employees. According to details passed to FT Alphaville after the event, Meghji chatted with chief administrative officer Vik Sawhney to rally the troops and explain why BREIT is actually awesome.
What followed was a version of the defence that Blackstone had previously released on BREIT’s website: a surge in withdrawal requests had forced it to limit redemptions that were mainly coming from Asian investors taking profits to meet margin calls elsewhere.
The call did help explain, at least partly, the stark divergence between its returns and the performance of the listed REIT universe. BREIT is more exposed to housing in faster-growing “Sun Belt” states, and a canny interest rate hedge has increased in value by $5bn. As Meghji told his fellow Blackstoners: “We picked the right asset classes, the right geographies, and we made a really good call on interest rates.”
More interesting was when Meghji turned to how Blackstone will ensure a “terrific” future for BREIT as well.
To an extent this is because Blackstone estimates that prevailing market rents are about 20 per cent higher than the rents it is charging today, so as leases expire it should be able to jack up costs by at least that level.
This growth is already pretty much “in the piggy bank”, Meghji told colleagues. And if some tenants can’t pay higher rent, they could expect a visit from the bailiff (our emphasis below):
Today on the ground, we’re seeing 5 per cent rent growth, we’re also seeing a meaningful increase in economic occupancy as we move past what were voluntary eviction restrictions that had been in place for the last couple of years.
Blackstone says on its website that, due to the “extreme hardship” many tenants suffered during the pandemic, it didn’t make a single eviction due to non-payment across its housing portfolio for two years. It seems that any remaining forbearance is now finito.
If you’re a student, or live a Blackstone-owned affordable housing unit, you’re not going to get much succour in 2023 either. Here’s what Meghji said on the call:
We’re a big owner of student housing, and in our student housing portfolio we’re signing leases today for next academic year at 9 per cent higher rents than this year. So we know what this growth will look like.We also have a big affordable housing portfolio where rent growth is a function of inflation on a lag. Here too we know what growth will be next year. It’s going to be in the high single digits.
To be fair, rents for affordable housing in the US (properties that fall under the Low-Income Housing Tax Credit program) are federally regulated, so Blackstone has less discretion here. Though it could presumably decide to eschew the maximum-allowed rent increases, given it has called the lack of housing supply a “national crisis” and vowed to preserve affordable housing.
Blackstone does enjoy full discretion when it comes to its industrial properties — and oooh boy are they squeezing those tenants! Meghji said that BREIT increased rents by 38 per cent on industrial leases that expired in the third quarter, and leases being renegotiated right now were heading towards an increase of over 40 per cent.
This may all be good news for BREIT; but it is less so for tenants. And there’s a question of how sustainable this really is. In a statement to FTAV, Blackstone said:
BXTV is on every week and was designed to keep our people informed about market dynamics impacting our business. Setting the facts straight when there is misreporting is standard course.
We believe we have the most favourable resident policies among any large landlord in the US For two years, Blackstone chose to not make a single eviction for non-payment across our US rental housing portfolio.
Early premarket gappers
- Gapping up:
- MDB +28%, GWRE +4.4%, SFIX +3.3%, PINS +2.9%, MORN +2.8%, IVVD +2.6%, HLF +2.1%, TOL +1.2%, AXON +0.9%, STOR +0.5%, MA +0.5%
- Gapping down:
- IBIO -51.3%, AVAV -9.3%, ADMA -8.8%, CLFD -7.1%, SNDX -5%, SWBI -4.8%, NBIX -4.5%, CUE -4%, ZUO -3.9%, PLAY -3.9%, CXM -3.8%, HQY -2.6%, GSK -2.3%, EXAS -2%, AFYA -1.6%, CXW -1.5%, MSGE -1.4%, MOS -1.2%
After Hours Summary: MDB +25.1%, CASY +3.1%, CXM +2.8%, TOL +1.9% up on earnings, PINS +2.9% after partnering with Elliot Investment Management; ADMA -11.4% (guidance), SWBI -8.5%, HQY -5.8%, ZUO -4.8%, PLAY -4.1% down on earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: MDB +25.1%, CASY +3.1%, CXM +2.8%, TOL +1.9%, S +1%
Companies trading higher in after hours in reaction to news: PINS +2.9% (partnering with Elliot Investment Management), BFLY +2.6% (CEO departing), IVVD +2.1% (appoints new COO), TXT +1.1% (awarded $1.36 bln U.S. Army contract), MA +0.7% (increases dividend; approves $9 bln for repurchases), KLAC +0.5% (launches X-ray metrology system), STOR +0.5% (receives CFIUS approval), EXAS +0.3% (gives presentation at SABCS 2022), MARA +0.2% (reports November BTC production), GVA +0.1% (awarded $14 mln project in CA), HIL +0.1% (awarded construction management services contract)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ADMA -11.4% (guidance), SWBI -8.5%, HQY -5.8%, ZUO -4.8%, PLAY -4.1%, AVAV -3.2%, GWRE -2.2%
Companies trading lower in after hours in reaction to news: IBIO -37.9% (stock offering), ADMA -11.4% (stock offering), SNDX -7.1% (commences $150 mln public offering), NBIX -5.6% (updates on Phase 2 Study), CLFD -4% (to sell $100 mln common stock), BLK -0.8% (Bluebell Capital Partners seeking to replace CEO, according to Reuters), LUV -0.1% (reaches Tentative Agreement with Local 557)
Russia Erects New Missile Base On Island Near Japan For "Round-The-Clock Watch"
Russia has inflamed regional tensions with Japan by deploying new missile defense systems in the disputed Kuril Islands, specifically a mobile coastal defense missiles system on a northernmost island in the chain.
"Coastal servicemen of the Pacific Fleet will keep a round-the-clock watch to control the adjacent water area and strait zones," the Russian defense ministry said in announcing the new missile placement on Tuesday.
The Bastion mobile missile defense system, such as the kind seen in earlier Kuril deployments, has a range of 310 miles, via Reuters/Russian MoD.
Paramushir is the island hosting the new coastal defense missiles, which lies between Russia’s Kamchatka Peninsula and Japan, with the Kremlin further describing that it plans a permanent troop deployment to keep the systems operational for year-round service, including military housing and even recreation, akin to a full base.
Russia has long been denounced by Japan and its allies in the West for militarizing the islands, building up a military presence "under the radar" - despite Tokyo also claiming sovereignty over them, which it calls the Northern Territories or Southern Chishima.
All of this comes amid long-running on again, off again peace negotiations over the islands' status. Russia had already deployed Bastion systems on Matua, part of the central Kuril Islands, but this new announcement of an expansion of coastal systems to other islands on a year-round basis marks a significant escalation.
As for the peace talks regarding the islands' status, Russia cut them off after Japan imposed Ukraine-related sanctions on Moscow. According to Reuters, "Japan's Chief Cabinet Secretary Hirokazu Matsuno told a Tuesday news conference that the government will closely monitor the Russian military activity, adding it has been intensifying in the far east regions in tandem with Moscow's invasion of Ukraine."
Washington-based think tank Center for Strategic and International Studies in a September report urged greater United States involvement in the region as a result of Russia's ongoing island militarization.
"Russia's steps to boost its presence suggest that the islands will continue to play a pernicious role in the future of Russo-Japanese relations and that Japan and the United States should deepen consultations regarding Russia's activities in the region," CSIS said.
Apple Music is expanding on its popular real-time lyrics feature with an all-new karaoke-style mode. Called Apple Music Sing, this new feature “allows users to sing along to their favorite songs with adjustable vocals and real-time lyrics.” Apple Music Sing is integrated directly into the Music app, making it “fun and easy for anyone to participate.”
Apple Music Sing is a new way to hum, rap, jam, or sing along with millions of your favorite songs. Newly enhanced beat-by-beat lyrics make it even easier to follow along with the music. Fully adjustable vocals let you duet with the original artist, sing solo, or mix it up.
Apple Music Sing was announced in a press release today. The feature includes a number of different capabilities, ranging from adjustable vocals, background vocals similar to traditional karaoke, and a duet view. The full details are as follows:
- Adjustable vocals: Users now have control over a song’s vocal levels. They can sing with the original artist vocals, take the lead, or mix it up on millions of songs in the Apple Music catalog.
- Real-time lyrics: Users can sing along to their favorite songs with animated lyrics that dance to the rhythm of the vocals.
- Background vocals: Vocal lines sung simultaneously can animate independently from the main vocals to make it easier for users to follow.
- Duet view: Multiple vocalists show on opposite sides of the screen to make duets or multi-singer tracks easy to sing along to.
Oliver Schusser, Apple’s vice president of Apple Music and Beats, explained:
“Apple Music’s lyrics experience is consistently one of the most popular features on our service,” said Oliver Schusser, Apple’s vice president of Apple Music and Beats. “We already know our users all over the world love to follow along to their favorite songs, so we wanted to evolve this offering even further to enable even more engagement around music through singing. It’s really a lot of fun, our customers are going to love it.”
Alongside Apple Music Sing, Apple says that Apple Music will be adding a “suite of more than 50 dedicated companion playlists featuring all of the epic songs, duets, choruses, and anthems that have been compelling people all around the world to sing.”
Apple Music Sing will launch with support for “tens of millions of songs.” There are no details on the specific catalog, but we’re guessing it’s tied to songs that support Dolby Atmos. This is because Apple has the stems of these songs, allowing for adjustable vocal volumes.
Apple Music Sing will be available later this month for Apple Music subscribers worldwide. The feature is supported on iPhone and iPad models as well as the new Apple TV 4K. We’re still waiting on full details, but this seems to mean that Apple Music Sing won’t be available on previous-generation Apple TV models.
>>> Up
* Elis Raised to Overweight at JPMorgan; PT 16.50 euros
* Haleon Raised to Overweight at Barclays; PT 360 pence
* Landis + Gyr Raised to Equal-Weight at Morgan Stanley
* Novozymes Raised to Overweight at JPMorgan; PT 500 kroner
* STS Group Raised to Buy at SMC Research; PT 12.60 euros (+)
* Wacker Chemie Raised to Neutral at JPMorgan; PT 104 euros
>>> Down
* Wacker Chemie Raised to Neutral at JPMorgan; PT 104 euros
>>> Down
* Air Liquide Cut to Neutral at JPMorgan; PT 146 euros
* Cyfrowy Cut to Accumulate at Erste Group; PT 21 zloty
* Elmos Semiconductor Cut to Hold at Hauck & Aufhaeuser (+)
* Johnson Matthey Cut to Underweight at JPMorgan; PT 2,000 pence
* Kering Cut to Neutral at UBS; PT 572 euros
* Neinor Cut to Neutral at Grupo Santander; PT 9.40 euros (+)
* Pagegroup Cut to Underperform at Jefferies; PT 400 pence
* Persimmon Cut to Hold at Investec
* SKF Cut to Underweight at Morgan Stanley
* Terna Cut to Underweight at Morgan Stanley; PT 7 euros
* Terna Cut to Underweight at Morgan Stanley; PT 7 euros
* Umicore Cut to Underweight at JPMorgan; PT 27.50 euros
* Wood Cut to Neutral at Citi; PT 150 pence
>>> Initiation
>>> Initiation
* Argenx ADRs Rated New Outperform at William Blair
* CTP Rated New Outperform at Oddo BHF; PT 14.50 euros
* CTP Rated New Outperform at Oddo BHF; PT 14.50 euros
* Epiroc Assumed Equal-Weight at Morgan Stanley; PT 192 kronor
* Greenyard Rated New Hold at ING; PT 7 euros
* IMI Assumed Equal-Weight at Morgan Stanley
* JDE Peet's Rated New Overweight at Barclays; PT 40 euros
* JD.com ADRs Rated New Hold at Baptista Research; PT $64
* Lords Group Trading Rated New Buy at Stifel; PT 100 pence (+)
* Metso Outotec Assumed Equal-Weight at Morgan Stanley
* Supermarket Income Rated New Hold at Shore Capital (+)
* Thermo Fisher Rated New Outperform at RBC; PT $661
* Weir Assumed Underweight at Morgan Stanley
>>> Call
>>> Call
* JPM Upgrades Novozymes, Cuts Umicore Among European Chemicals (+)
* JDE Peet’s New Overweight at Barclays on Defensive Positioning
* MS Prefers Defensive Capital Goods Names, Cuts Three Stocks
* MS Prefers Defensive Capital Goods Names, Cuts Three Stocks
* Pagegroup Downgraded at Jefferies Following Outperformance
* Terna Cut as Morgan Stanley Sees Too Much Growth Priced In
* Subsea 7, Technip Energies, Aker CC Preferred at Citi; Wood Cut
TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits
Taiwan company plans second factory at U.S. site to make advanced semiconductors
PHOENIX—President Biden visited a Taiwan Semiconductor Manufacturing Co. site Tuesday in Arizona, where the company plans to build a second factory and increase its investment to $40 billion.
TSMC, TSM -2.52% the world’s largest contract chip maker, is stepping up its plans for U.S. manufacturing. That investment follows the passage of a law earlier this year designed to boost U.S. semiconductor production, reflecting Washington’s concerns about reliance on Asia for critical chip making.
“This is going to be an incredible asset to the state of Arizona,” Mr. Biden said during remarks following a tour of the site. “American manufacturing is back.”
Under a previously disclosed $12 billion investment plan, TSMC is already building its first factory in Arizona.
In advance of Mr. Biden’s visit to the plant on Tuesday, the White House released details of a second factory planned for the site, saying construction would start in the coming year and production would begin in 2026.
The second factory, first reported by The Wall Street Journal, will make chips with 3-nanometer technology, equal to the tiniest and fastest chips available today, and TSMC’s total investment in Arizona will expand to $40 billion, the White House said. It didn’t say how many years the investment would cover.
The White House said Mr. Biden met with a group of top executives following his Arizona remarks, including Morris Chang and Mark Liu of TSMC, Tim Cook of Apple Inc., Jensen Huang of Nvidia Corp. , Sanjay Mehrotra of Micron Technology Inc., Lisa Su of Advanced Micro Devices Inc. and Peter Wennink of ASML Holding NV. Mr. Cook tweeted that Apple would be the Arizona site’s largest customer.
Washington agreed to provide semiconductor makers with lucrative incentives under legislation passed this year.
In August, Congress passed the Chips and Science Act of 2022, which included $52.7 billion for U.S. semiconductor companies for research and development, manufacturing and workforce development. The bill also includes provisions to reinforce the supply chain for U.S. companies and spur technological innovation.
TSMC recently started making 3-nanometer chips in Taiwan. By 2026, those chips would likely be at least two generations behind the leading edge.
A nanometer is one-billionth of a meter. The number of nanometers is a rough guide to how much processing power is packed into the chip’s small space, with a lower number indicating a more advanced chip.
The White House said the first TSMC factory in Arizona, which originally was supposed to produce 5-nanometer chips, would also produce 4-nanometer chips. That factory is expected to start mass production in 2024.
TSMC executives have said they plan to keep the most advanced manufacturing in Taiwan.
In a letter to the Commerce Department last month, TSMC said it was primarily relying on its own capital supplemented by U.S. incentive funds for building the complex in Arizona. It didn’t specify how much money it might get from the government. The company also described challenges at the Arizona site such as unexpected construction snags.