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.
It's been stamped throughout financial news sources that commercial real estate is the next 'Big Short.' What a bold statement to make. Deeming another opportunity as similar to the 'Big Short' has big shoes to fill. Here's where investors are coming from.
As U.S. equity markets continue their march back toward all-time highs, courtesy of the latest BTFD binge trade, at least one 'small' segment of the U.S. economy does not seem to be participating in the rally as 9 brick-and-mortar retailers have already filed for bankruptcy protection in 1Q 2017 alone. That volume of filings matches the total number of retail bankruptcies for all of 2016 and puts the industry on pace to exceed even the 'great recession' highs. Per CNBC: Nine retailers have filed in just the first three months of 2017, according to data provided exclusively to CNBC from AlixPartners consulting firm. That equals the number for all of 2016. It also puts the industry on pace for the highest number of such filings since 2009, when 18 retailers resorted to that action. The rising number of retail bankruptcies comes as consumers are making more purchases online, and shifting their spending toward travel and other experiences. Meanwhile, the supply of physical stores continues to outweigh shopper demand, putting pressure on the industry's profits. "It's just kind of this perfect storm where things are coming together, and it's going to continue for awhile," Deb Rieger-Paganis, a managing director in the turnaround and restructuring practice at AlixPartners, told CNBC. Many of the early retail victims include companies that were snapped up by Private Equity interests during the last down cycle and aggressively levered. In addition to the following nine retailers that have already liquidated or are working to reorganize, Payless Shoes and Bebe are also expected to file at some point in the not so distant future. Gordmans Stores Gander Mountain General Wireless Operations (formerly RadioShack) HHGregg BCBG Max Azria Michigan Sporting Goods Distributors Eastern Outfitters Wet Seal Limited Stores Of course, as Deb Rieger-Paganis, a managing director in the turnaround and restructuring practice at AlixPartners, points out, retail bankruptcies and/or store closures, especially from anchor tenants, can push the whole retail space into a downward spiral as "people don't like to shop where there's a lot of vacant space." So while larger retailers like Macy's, J.C. Penney, Sears and Kmart have avoided chapter 11 so far in this cycle, they're all in the process of closing hundreds of stores and those vacancies are likely to have ripple effects through the industry. Meanwhile, as we pointed out last month (see "America's Desperate Mall Owners Turn To Grocers, Doctors & High Schools To Fill Empty Space"), America's mall owners are having such a hard time filling empty retail space that they're turning to high schools, doctors offices and grocery stores. Once a shining beacon of American capitalism, malls around the U.S. are failing at an alarming rate due to a combination of shifting consumption patterns, years of underinvestment by mall owners and a spate of retailer bankruptcies over the past 12 months that have left large swaths of once prime real estate empty (see "Number Of Distressed US Retailers Highest Since The Great Recession"). Now, as the vacant square footage grows larger, mall owners are being increasingly forced to turn to non-conventional tenants to fill empty space. Per the Wall Street Journal, the latest target of mall owners is yet another struggling industry, grocers, with everyone from Whole Foods to Kroger looking to snap up square footage at discount prices. Natick Mall in Natick, Mass., is leasing 194,000 square feet of space vacated by J.C. Penney Co. to upscale grocer Wegmans Food Markets Inc., which is planning to open a store in 2018. College Mall in Bloomington, Ind., plans to bring in 365 by Whole Foods Market in the fall. Grocery giant Kroger Co., meanwhile, has purchased a former Macy’s Inc. location at Kingsdale Shopping Center in Upper Arlington, Ohio, and plans to build a new store in its place. But we're sure it will all work out just fine and wall street will go on buying those mall reits with reckless abandon...you know, because dividend yields.