HAUZ - Shopping Center REITs: Bargain Hunting

• Bouncing back from punishing pandemic-related declines, Shopping Center REITs are on the cusp of a full recovery across all critical metrics but Omicron introduces fresh uncertainty and also potential opportunity.
• The retail landscape has improved dramatically this year. Retail sales are on-pace to rise over 15% this year while store closings are on pace for the lowest level in a decade.
• Recent earnings results have been impressive as rent collection has fully normalized while occupancy rates and leasing trends are quite encouraging - a clear contrast from their enclosed regional mall peers.
• Omni-channel retail strategy goes beyond the "showroom." We increasingly see well-located shopping centers becoming hybrid "distribution centers" in a decentralized last-mile delivery network powering same-day delivery.
• Bargains in the shopping center REIT sector were becoming hard to find before the Omicron-driven sell-off. We continue to favor the "essential" grocery-anchored REITs, but see emerging bargains in power center REITs.

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