Salient to Investors:
The Bloomberg mall REIT index has fallen 5.4 percent in 2013, the worst performing part of US property stocks, on sluggish retail sales and limited opportunities to expand, after posting the biggest increases from 2009 through 2012. Hoteliers and self-storage landlords are the top-performing REIT sectors in 2013.
Mall REITs reported the smallest increase in tenant-sales growth in 3 years in Q2 after strong growth since the credit crisis let them increase rents.
Benjamin Yang at Evercore Partners said fundamentals are good but slowing, and there appear to be more-attractive, better-accelerating core growth stories in some of the other sectors.
Keith Bokota at Principal Global Investors said the fundamentals are strong and results have been positive for mall REITs overall, but are overshadowed by the potential impact of rising borrowing costs on property valuations. Bokota said there continues to be robust demand for these high-quality and scarce assets.
Rich Moore at RBC Capital Markets said high-quality malls are so lucrative that they rarely come on the market, with publicly traded landlords owning most of the best-performing centers.
Cedrik Lachance at Green Street Advisors said mall owners may be cushioned from the impact of their tenants’ slowing sales because occupancies are as high as they have ever been.
Reis said regional mall vacancies fell to 8.3 percent in Q2 and rents rose to $39.62 a square foot.
Rich Moore at RBC Capital Markets said even if J.C. Penney got into more serious trouble, the impact on mall REITs would be minimal, and it is highly unlikely it will disappear. Moore said most landlords would love to get their J.C. Penney box back.
Craig Guttenplan at CreditSights said outlet centers are performing better than other retail-property types as consumers like bargains and are still cautious on spending.
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