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  • Alex Pettee, CFA

Shopping Center REITs: It Pays To Be Essential

  • Who's "Essential" and Who's not? Retail REITs have been slammed by the unprecedented coronavirus-related economic shutdowns, adding further pain to a sector already dealing with the ongoing retail apocalypse.

  • Unlike malls, the majority of shopping centers remain operational as "essential businesses." However, these REITs are more dependent on now-struggling small business retailers and independent franchises to fill small shops.

  • Shopping center REIT fundamentals were actually pretty solid heading into the pandemic. Same-Store NOI growth outpaced the REIT average in 2019 for the first time in nearly a decade.

  • The majority (11 of 17) of Shopping Center REITs report earnings this week. Among REITs to already report, 53% of April rent was collected while 54% of tenants were operational.

  • Grocery-anchored and high-quality power center REITs will be able to weather than near-term pain, but signs of stress - and dividend cuts - are likely to emerge among smaller names.

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