Archive for the ‘REITs’ Category

New Mall in the Works

by Elaine Misonzhnik October 26th, 2011

Regional mall operator Taubman Co. is getting ready to start work on at least one new mall, according to the Detroit Free Press.

During a third quarter earnings call with analysts, company officials said Taubman entered the predevelopment stage on a project in San Juan, Puerto Rico and was also forging ahead on malls in Hawaii and Salt Lake City, Utah. (The Salt Lake City project has been announced for some time).

This jibes with what Taubman chief operating officer William S. Taubman told Retail Traffic back in May, when he said there might be room in U.S. for up to 20 new malls.

“There is growth in this country, we will be adding millions of people over the next 40 years and they are going to need somewhere to shop.”

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Retail Owners Get Into Asset Swaps

by Elaine Misonzhnik September 7th, 2011

Continuing a trend started by Macerich Co. and General Growth Properties several months ago, Developers Diversified Realty and Glimcher Property Trust just announced they will be swapping assets they feel are better alligned with the other’s property platform.

DDR will sell Glimcher its Town Center Plaza, a 650,000-square-foot open-air mall in Kansas City, Kan. for $139 million. In turn, Glimcher will sell DDR its Polaris Towne Center, a 700,000-square-foot power center in the Columbus, Ohio market for $80 million. DDR specializes in power centers and already operates several assets in the Columbus area, so Polaris might be a better fit with its portfolio than that of regional mall operator Glimcher.

After the transaction goes through, in the fourth quarter of this year, DDR plans to use the net proceeds from the swap toward the purchase of prime assets it currently has under contract. While almost every retail REIT in the country previously announced plans to opportunistically acquire prime assets and dispose of non-core ones, many found out that the prices charged for core assets were above what they were willing to pay. Asset swaps like the one executed by DDR and Glimcher might help the REITs achieve their goals while at the same time helping bring down associated costs.

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Shopping Center REITs Remain Steady in Second Quarter

by Elaine Misonzhnik August 11th, 2011

Like their counterparts in the mall sector, shopping center REITs delivered a respectable performance in the second quarter of the year.

Out of 18 shopping center REITs, six beat consensus analyst estimates for FFO per share and three were in line with expectations. The outperformers included Kite Realty Group, Weingarten Realty, Equity One Inc., National Retail Properties and Federal Realty Investment Trust. Inland Real Estate Corp., Cousins Properties and Ramco-Gershenson Properties Trust performed as expected.

On the other hand, nine shopping center REITs missed estimates on FFO per share, mostly by a few pennies. These included Cedar Shopping Centers, Urstadt Biddle Properties, Saul Centers, Acadia Realty Trust, Amercian Assets Trust, Regency Centers Corp., Kimco Realty Corp., and Whitestone REIT.

Developers Diversified Realty, however, missed by $0.13 per share, partly as a result of charges related to the REIT’s efforts to sell off non-core assets.

On the whole, however, occupancies in most cases were well north of 90 percent and same-store NOIs continued to grow. According to today’s note from RBC Capital Markets’ analyst Rich Moore:

Operating metrics were generally positive across the retail real estate sector with no signs of an economic slowdown. Leasing velocity remains near record pace, move-outs are nearing their lows, bankruptcies are almost non-existent, bad debt is at an unusually low level, rent terms are normalizing, and, perhaps most importantly, tenant demand for space at the best centers has not abated.

Likewise, David Henry, president and CEO of Kimco Realty Corp., one of the country’s largest shopping center REITs, said he was pleased with the company’s performance in the second quarter of the year and with the general trends evident in the marketplace when discussing results with analysts on July 27.

Overall, we are confident and optimistic about the balance of the year and our full year operating results, he said.

shopping_center_reits_q1_2011_2

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Mall REITs Maintain Positive Momentum in Q2 2011

by Elaine Misonzhnik August 11th, 2011

Mall REITs delivered mixed results in the second quarter of the year, but overall, the mood in the industry remained positive, with REIT executives reporting improving leasing environment.

In the mall sector, Simon Property Group and CBL & Associates Properties outperformed analyst estimates for FFO per share for the quarter, by $0.07 and $0.03 respectively. Pennsylvania REIT, Taubman Centers, the Macerich Company, Glimcher Realty Trust and General Growth Properties missed estimates, largely because of impairement charges and adjustments. The misses ranged from only $0.01 per share for Taubman to $0.25 per share for Macerich.

Nevertheless, occupancies and NOIs were up almost uniformly across mall portfolios. The sole exception to NOI growth was PREIT, which reported a decline of approximately 1.2 percent, blamed primarily on write-offs associated with Borders’ liquidation.

According to comments made by Marshall Loeb, President and COO of Glimcher Realty Trust, during the company’s earnings call with analysts on July 22:

Coming off a successful Las Vegas ReCon Conference… there was a noticeable return of optimism from the retailers, with a focus on new deals. In fact, we are engaged in serious discussions regarding new 2011 deals and more importantly, saw a nice strengthening for 2012.

q1_mall_reits_2011

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Sanity Being Restored?

by David Bodamer August 9th, 2011

After yesterday’s carnage in retail REIT stocks, things are looking much better this morning. The losses have only been partially restored, but at least every firm is regaining ground.

sanity_restored

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Dramatic Buying Opportunity for REIT Stocks?

by David Bodamer August 9th, 2011

SNL Financial just posted a piece illustrating how dramatic the stock price fall was for REITs relative to the underlying property values of those firm’s assets.

It seems, in part, REITs get treated like financial stocks in moments such as this, which is why REIT shares have fallen even by an even greater magnitude than broader indices.

However, if SNL’s NAV estimates are accurate, there are now some huge opportunities here to buy REIT shares at a discount.

According to SNL, “All U.S. REITs fell to a discount to NAV of 22.62% as of Aug. 8 from a premium of 1.4% as of July 29.”

Check the chart:

11580897

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Free Falling

by David Bodamer August 8th, 2011

As expected, markets are continuing to tank in the wake of Standard & Poor’s downgrade of the United States credit rating.

Retail REITs are not immune from this. In fact, at a quick glance they appear to be doing worse than some of the broader indices. Regional mall REITs are leading the way down with General Growth, PREIT, CBL having the worst days so far.

blood_bath

Update 4:54 PM

Things didn’t get any better in the last hour the market was opened. Here’s the final carnage:

bloodbath_update

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SNL: REIT CEO Compensation Soared in 2010

by David Bodamer June 23rd, 2011

SNL Financial published a look at REIT CEO compensation that shows that the highest paid REIT CEOs saw a very nice boost in their compensation in 2010.

According to their research:

SL Green Realty Corp.’s Marc Holliday landed the largest total compensation during the year at $24.8 million, up 117.6% from the prior year. Under his leadership, SL Green’s total return bested the SNL US REIT Equity Index total return by 6.4 percentage points, at 35.3%, and FFO per share grew 9.3% year over year.

And while Holliday’s 117.6% year-over-year pay bump may seem high, other CEOs saw total compensation growth far exceeding that figure. David Simon, chairman and CEO of Simon Property Group Inc., saw the largest pay increase among the top 20 highest-paid CEOs and posted the second-largest total compensation.

In 2010, the company recorded a total return of 28.4%, and FFO per share fell 6.0% from a year earlier, while Simon’s total compensation grew 430.0% to $24.6 million from $4.6 million. Simon’s bonus climbed to $4 million in 2010 from $3 million in 2009, and he received $19.5 million in stock and option awards, up from $578,677 in the prior year.

Aside from Simon, several other retail REIT head honchos made the list.

Retail REITs ranked fifth through ninth on the list. Federal Realty Investment Trust CEO Don Wood made $9.76 million. Tanger Factory Outlet Centers CEO Steve Tanger received compensation of $9.44 million. Equity One CEO Jeff Olson got $9.15 million. And Macerich CEO Art Coppola was paid $8.99 million.

It was a big boost for all of them with Wood’s compensation up 178.1 percent, Tanger’s up 170.9 percent, Olson’s up 301.5 percent and Coppola’s up 54.5 percent.

All the retail REITs on the list posted total return growth in 2010. In addition, REIT share prices appreciated quite a bit last year.

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REIT Week Takeaways

by David Bodamer June 8th, 2011

It’s been a whirlwind couple of days. Altogether, I sat in on 18 retail REIT presentations at NAREIT’s REIT Week. (During a few of the time blocks multiple retail REITs were reporting, so there were some I could not get to.)

The major themes were similar to those coming out of ICSC’s RECon a couple of weeks ago.

When it comes to leasing, retailers of all types are much more aggressive than they have been since before Lehman Brothers imploded. Occupancy rates tend to be higher for both regional mall REITS and shopping center REITs at their large spaces. There are still gaps to fill when it comes to inline tenants. In part, that is stemming from the fact that mom & pop type retailers are still having a hard time lining up financing. Smaller banks remain troubled. So while Wall Street is lending–which is helping the largest retailers, who have ample lines of credit to fund expansion–the traditional sources of financing for small businesses are still not available.

However, many retailers are also rethinking store sizes and shrinking concepts. In many cases retail REITs seem to be welcoming this development. If they can recapture all or part of a big box that’s paying below market rents, it gives them a chance to improve cash flows by finding a replacement or subdividing the space.

On the investment sales side, I heard a few different references to there being an “ocean of capital” that’s now chasing retail assets. The competition is most fierce for class-A product. But with a limited supply of that on the market, investors are slowly moving their way down the value chain. The fact that banks, insurance companies and CMBS lenders are also increasing their tolerance for risk will help to fund deals for class-B and class-C product. The competition is such that many retail REITs don’t think they’ll be able to acquire that much. Many will end up being net sellers since they’re finding it’s an ideal time to sell non-core assets. Only a few of the REITs that reported seem to be aggressively looking to expand through acquisitions.

When it comes to development, just about the only ground-up development anyone seems excited about is the outlet center space. The figure going around the show was that there is room to build 100 outlet centers in the U.S. So a lot of firms–even those with no track record in outlets–are taking a hard look at how to get in on the business. Much more prevalent was talk of redevelopment and expansion. REIT managers by-and-large agreed that redeveloping or expanding existing properties was the best way to increase NOI and organic growth, given current market conditions.

I’ll expand on these thoughts in an analysis piece that I’ll post tomorrow morning.

In the meantime, here are links to all the live blogs we posted from REIT Week.

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NAREIT REIT Week Live Blog: Westfield Group

by David Bodamer June 8th, 2011

Mark Stefanek, CFO-U.S., is reporting for Westfield Group at NAREIT’s REIT Week.

Refresh page for updates.

Below are notes from the session.

4:34: Stefanek: Our philosophy is intensive management and redevelopment. We get 12 to 15 percent on incremental capital we spend. And we look to make the centers continually relevant. … Garden State Plaza, for example, has less than 20 percent of the same tenants it did in 1994. … We came from place where it’s normal to have other types of users in malls—such as grocers. We talked about that so long in the U.S. that we stopped talking about it. … The business came to us. … And so far we’ve added three grocers to suburban malls. … We think it’s very transforming for the mall.

4:35: Stefanek: We think the market is in a good place to recycle capital. We are looking at properties where we don’t have the ability to spend significant money on redevelopment in the coming years. … We’re looking at new markets where we haven’t been in the past. … In the past we’ve stuck to the four markets we’re already in (U.S., U.K., Australia, New Zealand), but now we’re looking beyond that.

4:37: Stefanek: Our March/April sales in the U.S. were up 7 percent. Based on all of that, we are expecting 2.5 to 3.0 percent same-center NOI growth in the U.S. (And greater increases in Australia and the U.K.)

4:39: Stefanek: At ICSC, retailers came to do deals. … Another interesting point is that a lot of the food court tenants are basically franchisees. That business is doing well because they are actually able to get financing. … It’s a small data point, but I thought it was very positive. … New concepts are going to the coasts. And tenants are going to B properties. … Retailers need to expand and they are going to not just the best centers.

4:40: Stefanek: In 2011 we will start somewhere between $750M and $1B in new redevelopment and in 2012 and 2013 it will be up to $1.5B in each year.

4:42: Stefanek: (On the World Trade Center.) We have the right of first offer. … We are talking to them about potentially doing retail. What’s holding it up is one of the office buildings may not get built right away. How do you deal with that? We’re a little bit the tail wagging the dog until the plan is set for the office building. … We are constantly meeting with the Port. We would like to be involved, but there is no hard and fast agreement.

4:48: Stefanek: We have an e-commerce mall in Australia. We have a different name-brand recognition there. We have a bunch of tenants signed up. The technology works. We have tenants that we don’t have in the malls. … We’ll see what comes of that. … As it relates to the U.S., the retailer doing the best is the one that is multi-channel—he’s got a catalog, e-commerce and bricks-and-mortar. … There are retailers using spaces as showrooms. That argues for smaller stores. … (With some retailers) you can buy things on the Internet and pick it up at stores. … That’s what the mall is. It constantly changes. It constantly churns. … If you come with a view that all forms of retail ought to be in the mall, it gives you a whole other data point.

4:54: Stefanek: (In response to its disposition strategy on the U.S. properties the firm is marketing.) Most likely, this is it. If we sell 15, that leaves us with 40. … It’s a good portfolio. There’s plenty of demand. We can’t sit here and say we’re going to sell next year. I don’t know where markets are going to be. … I can’t tell you how it’s pricing, but if we didn’t think it was going well, we would have stopped it.

Session ends.

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