Mall traffic is facing challenges with online shopping taking precedence over in-store purchase. However, Simon Property is making concerted efforts to beat the blues.
Here are some reasons why REIT ETFs deserve a place in your portfolio despite Fed's rate hike plans.
America's dying malls have been a frequent topic for us over the past couple of years. And, with the S&P soaring to new highs each and every day while completely shaking off a swath of retail bankruptcies that have left malls with no option but to fill their empty spaces with high schools, doctors offices and grocery stores, you can imagine our intrigue. And while we've tended to focus on the demand side of the retail equation, a chart published by Bloomberg (via CoStart Group) today helps to put the ridiculous growth in retail square footage in the U.S. into perspective. As an example, Bloomberg highlights the Cleveland market where developers have added 21 million square feet of retail space since 2000 despite having lost 90,000 residents over the same time. Real estate developers built more than 21 million square feet of new store space in the Northeast Ohio metropolitan area from 2000 through the first three months of this year, increasing its retail footprint by 21 percent. But while the new stores were moving in, the shoppers were moving out. The metro area’s population declined by more than 90,000 over a similar period, and it became a stomping ground for students of the dying American mall. Across the U.S., retail real estate development that outpaced demand marked the early years of the new millennium. Now retailers are going bankrupt at a record rate, and hedge funds are betting against the commercial mortgages used to finance mall properties. Credit Suisse this month predicted that as many as 275 malls, a quarter of the U.S. total, will close in the next five years. But Cleveland certainly hasn't been alone in their irrational retail building spree as most of the major cities across the country have seriously ramped up their retail square footage per capita. Not surprisingly, cities like Chicago and Cleveland, which have experienced among the highest population declines to domestic migration, have seen some of the largest builds in retail square footage per capita. Meanwhile, America's latest debt-fueled real estate bubble came despite online sales taking nearly 10% of overall retail spending over the same period. Nothing solves a weak demand problem like more supply....
Simon Property Group Inc. (SPG) joined forces with health and lifestyle company, Life Time, for changing consumer experience at Southdale Center in Edina with a planned athletic resort.
Simon Property Group, Inc. (SPG) is continuing with its strategy to invest in its portfolio.
Many assume that rate hikes are bad news for REITs, but is that always the case? Today's podcast takes a look at some areas in the REIT world that could be winners despite an increase in interest rates.
While occupancy rates touched record level in Q1 this year, FFO reported a decline from the last quarter, per a NAREIT media release.
We updated our research report on Simon Property Group, Inc. (SPG) on May 15.
One month ago, in his latest letter to clients, Horseman Capital's Russell Clark revealed a new "investing" strategy using ETF flows as a catalyst for positioning and bets. Citing the transition from active to passive as a catalyst that makes markets increasingly more inefficient, something One River's Eric Peters noted in a recent weekly note, Clark repeated a lament made by many short sellers, stating that there "are complaints from some quarters about it being harder to short sell as flows of money push up stocks." So what is his new shorting philosophy? This is how he explained it, using his biggest short at the moment, retail REITs: The biggest short sector in the fund are REITs. In the US, they are mainly retail REITs, and there are two reasons for this. One is that we have guaranteed sellers in the Japanese US Reit fund. The other reason is the appalling performance of the major tenants. However, as an aside, I like them as a short area as they have the highest exposure to ETFs of any sector. Bloomberg allows you to find the biggest ETFs and open ended funds which are invested in US Real Estate Sector. The top 28 funds have total assets of 187bn USD, of which 13.3bn USD invested in Simon Property Group, that is 24% of Simon’s market cap. However, Real Estate passive funds are not the only passive fund invested in Simon. When all passive funds weights are added together I get over 50% of Simon Property Group shareholders are passive. I wonder who will become the buyer if all these funds start to see redemptions if there are some problems in US commercial real estate? His conclusion: The long bull market in passive investment has made them wilfully blind to the liquidity risk that they are running. Passive investments are concentrated in the US market... And, if Eric Peters is right, "when these markets do finally have a correction there will be no bid for many of these stocks", so all Clark has done is tighten the universe of ETF unwinds from the entire market to a market sector or subset of stocks, in this case the retail REIT space. What was most interesting about the new Horseman approach, however, was that it combines fundamentals - in this case the declining purchasing power of the US consumer and the secular shift to online buying - with market inefficiency in the form of ETF flows that have pushed stock prices ever higher from their "fair value" in anticipation of an eventual sharp move lower as ETF inflows finally reverse. That said, it was not immediately clear what the catalyst for this reversal in ETF flows would be. In any case, we said one month ago that one can repeat the exercise for all other sectors, and stocks, that have a substantial exposure to ETFs, and slowly but surely the shorts will start to accumulate, putting further pressure on sectors and stocks that have been abnormally influenced by passive flows, until finally the money flow support breaks, leading to a crack in the current market topology, potentially followed by the next market correction, or worse. Now, courtesy of Goldman, we have the full breakdown of the most and least concentrated sector ETFs. As the chart below show, the five most concentrated ETFs currently, on both a relative in terms of current weighing of the Top 3 stocks, and absolute (in therms of overall weight of the top 3 names) basis, are the Consumer Discretionary (XLY), Info Tech (XLK), Financials (XLF), Energy (XLE) and Utilities (XLU), all of which have never seen a greater relative weighing of their top 3 companies. On the other end are the Healthcare (XLV) and Industrials (XLI) ETFs. For those who think the logic behind the Horseman ETF (out)flow-based trading strategy works, the best trade would be to go short all the most heavily weighted ETF constituent stocks, while shorting the least concentrated ones, in creating a relatively low-risk pair-trade ahead of the next "August 2015" ETFlash Crash, which is absolutely assured to take place again, the only question is when, and who to keep the trade on with the lowest possible negative carry.
Fidelity Series Real Estate Equity Fund (FREDX) invests the majority of its assets in real estate companies.
Simon Property came out with funds from operations per share of $2.74, up from the year-ago quarter figure of $2.63.
Realty Income Corp's (O) first-quarter 2017 adjusted FFO per share of 76 cents exceeded the Zacks Consensus Estimate of 75 cents. Results reflect better-than-expected growth in revenue.
Shares of Liberty Property Trust (LPT) inched up 0.27%, during Tuesday's regular trading session, after the company reported better-than-expected FFO per share and revenues for first-quarter 2017.
Boston Properties Inc.'s (BXP) first-quarter 2017 FFO per share of $1.48 missed the Zacks Consensus Estimate of $1.50.
Equity Residential (EQR) reported first-quarter 2017 normalized FFO per share of 74 cents, in line with the Zacks Consensus Estimate.
Simon Property Group Inc. (SPG) is expected to report first-quarter 2017 results on Apr 27, before the market opens.
It should come as no surprise that America's malls, the wonderlands of the 80s, are in big trouble. After slowly losing market share to online competition for years, brick-and-mortar retailers have finally succumb to changing consumer habits which has resulted in a massive surge in bankruptcies and store closings. Of course, as we've pointed out before, mall owners have tried just about everything to fill their empty spaces including the addition of grocery stores, doctors' offices and even high schools. But while most mall owners have been trying to figure out how to fill up the inside of their stores, they apparently overlooked another very 'valuable' asset: their empty parking lots. With customer traffic sagging, U.S. retail landlords are using their sprawling concrete lots to host events such as carnivals, concerts and food-truck festivals. They’re aiming to lure visitors with experiences that can’t be replicated online -- and then get them inside the properties to spend some money. “Events draw people to come to the shopping center,” said Keith Herkimer, whose company, KevaWorks Inc., is working with big landlords including GGP Inc. and Simon Property Group Inc. to produce outdoor events. “They generate revenue for the owner and offer a chance for cross-promotion, so they can try and drive more customers into the stores.” The idea, obviously, is to attract customers for experiences that can't be replicated online with a focus on everything from movies nights to carnivals. Retail landlords have already made a push toward experience-driven offerings by adding restaurants, movie theaters and activity centers for children. Many malls are also adding rotating stores around for only a short time -- known as pop-up shops -- that are meant to attract young customers who see shopping as an event. Now, events are reaching beyond the malls themselves. Herkimer’s task is to bring crowds to parking lots with events that generate as much as $60,000 a week for mall owners from the largest outdoor events. The idea is gaining traction. Next month, Simon Property is having the first carnival in its Round Rock Premium Outlets parking lot, about 20 miles (32 kilometers) north of Austin, Texas. Similar events are being held for the first time at locations such as Central Mall in Port Arthur, Texas, managed by Jones Lang LaSalle Inc., and a Cheyenne, Wyoming, mall owned by CBL & Associates Properties Inc. In July, Simon Property’s Orland Square Mall, southwest of Chicago, will be holding its first parking-lot food-truck festival, with plans for live music performances, Herkimer said. Meanwhile, REIT investors are finally starting to understand that while carnivals may help to pay the electricity bills of America's malls they do little to help generate a return on the hundreds of millions of dollars worth of retail square footage that lies empty inside the stores.
Below we share with you three best-rated real estate mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy)
GGP and Simon Property's (SPG) venture with Life Time comes at a point when mall traffic has been declining owing to a change in shopping patterns, with online shopping taking precedence over in-store purchase.
Simon Property Group, Inc. (SPG) is enhancing its retail portfolio worldwide. Recently, the company's joint venture with Shinsegae Group opened Siheung Premium Outlets in South Korea.