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Retail Meltdown Demolishes Mall Investors

by Wolf Richter, Wolf Street:

The closure of thousands of retail chain stores last year and this year, with many more to come – from big anchor tenants such as Macy’s to smaller stores such as Payless Shoes – and the bankruptcies and debt restructurings ricocheting through the industry are having an impact on retail malls. And mall investors – that may include your retirement account – are getting crushed.

The commercial real estate industry has been claiming that these shuttered retail spaces are being converted into restaurants or fitness centers or smaller shops or whatever. And zombie malls are leasing out their parking lots to car dealers to store their excess new vehicle inventory, and that everything is going to be fine.

But investors in publicly traded Real Estate Investment Trusts that were for years among the stars in the S&P 500 are voting with their feet.

It’s not that these REITs are doing all that badly on an operational basis. They’re hanging in there. But many of the announced store closings and bankruptcies haven’t worked their way through the pipeline.

Shares of these REITs all peaked together at the very end of July 2016 and have since then plunged in unison.

Kimco Realty Corp (KIM) says it’s “one of North America’s largest publicly traded owners and operators of open-air shopping centers,” with “interests” in 517 shopping centers with 84 million square feet of retail space in 34 states and Puerto Rico. Shares fell 2.6% to $19.42 on Monday and 13% over the past month. They’re down 66% from the peak of $32.23 at the end of July 2016:

Macerich (MAC), with 54 million square feet of retail space at 48 regional shopping centers, calls itself “one of the country’s leading owners, operators and developers of major retail real estate.” It disclosed that revenues in Q1 fell 3.5% year-over-year, and that mall portfolio occupancy edged down to 94.3%, from 95.1% a year earlier.

It’s starting to feel the pain, but it’s not the end of the world. But its shares dropped 2.5% on Monday and 8.3% over the past month. They’re down 36% from the peak at the end of July, 2016:

Simon Property Group (SPG), “the world largest publicly traded real estate company,” as it says, fell 1% to $162.84 on Monday and 7% over the past month. It’s down 29% since the peak at the end of July. And this despite a massive share buyback program, that included buying back 870,692 shares in Q1:

Read More @ WolfStreet.com

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