BPYU - Mall REITs Like Simon and Brookfield Need a (Different) Contingency Plan
Several indicators point to the pandemic finally abating, at least in the U.S. Stores and restaurants are (for the most part) operating at greater capacities, while schools are more likely to be meeting in person now than they were just a few months ago. But not every retailer is bouncing back as the contagion comes back under control, partly because they are no longer there.
According to data from Moody's Analytics, vacancy rates at regional and super-regional malls stand at a record-high 11.4% as of the end of the first quarter. Dig a little deeper and you'll discover that rents being collected per square foot of retail selling space are considerably lower than they were a year ago. Of course, that would be expected when supply increases and demand falls.
Thus far, major mall owners like real estate investment trust (REIT) specialists Simon Property Group (NYSE: SPG) and Macerich (NYSE: MAC) have managed to shrug off the headwind. Indeed, Simon and Brookfield Property REIT (NASDAQ: BPYU) co-acquired struggling department store chain J.C. Penney out of bankruptcy in December. That purchase follows Simon's other 2020 acquisitions of Forever 21, Brooks Brothers, and part of Lucky Brand Jeans. In a similar vein, Brookfield Asset Management (NYSE: BAM) -- parent to Brookfield Property REIT -- earmarked $5 billion last year to help save struggling retailers, exchanging funding for minority stakes.
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Mall REITs Like Simon and Brookfield Need a (Different) Contingency Plan