Economics, Housing, & Commercial Real Estate Analysis

Keepin' It Real 

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  • Alex Pettee, CFA

Mall REITs: Merger Madness

  • Mall meltdown? The bleeding continues for the long-struggling mall REIT sector, which woefully underperformed the REIT average for a fourth straight year in 2019, pain that has dragged into 2020.

  • Desperate times call for desperate measures. Merger madness has taken hold in early 2020 as Simon scooped up Taubman as well as retailer Forever 21 in a fairly unprecedented move.

  • Despite a relatively strong year for overall retail sales, store closings surged in 2019 to the highest level since the recession as razor-thin retail margins continue to get squeezed.

  • Excluding Simon and Taubman- which have delivered steady albeit uninspiring results - average FFO growth dipped 12% in 2019 and is expected to plunge another 20% in 2020.

  • While the fundamental outlook remains bleak for the lower-productivity mall REITs teetering on the edge of relevancy, M&A speculation brings a glimmer of hope amid an ongoing fight for survival.

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