PPTY - Mall REITs: Retail Rout

• One step forward, one back. After nearly doubling in value last year, Mall REITs have been the worst-performing major property sector in 2022 as the stimulus-fueled retail strength has stalled.
• The tech wreck has spilled over to become the retail wreck in recent weeks. Retail stocks are now off by nearly as much as the depth of the lockdown lows.
• Mall REITs earnings results were actually decently encouraging with Simon and Tanger boosting their full-year FFO outlook, noting a recovery in tenant sales and rent collection back to pre-pandemic levels.
• Soaring fuel prices and persistent inflation have triggered a "rapid slowdown" in several retail categories in recent months at some major retailers, however, and we reiterate that a recession could be a final death blow to many lower-tier malls.
• We've remained underweight mall REITs over the past half-decade given the evident secular headwinds on the enclosed regional mall format, but we continue to see "sum-of-the-part" value in Simon Property, which owns a valuable retail brands portfolio alongside its property portfolio.

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