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.