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Mall REITs Pursue Multiple Strategies in Dealing with Tenant Troubles

May 26, 2017

Although uncertainty looms over the retail sector as owners, managers, and vendors alike scramble to adapt to the shifting landscape, some retail REITS are already seeing positive results from newly formulated strategies to counter the explosive growth e-commerce has been experiencing. Philadelphia-based PREIT for example has sold underperforming assets and is reinforcing the remaining properties to include tenants such as Legoland, Dicks Sporting Goods, and Van Maur, a high-service fashion anchor. Their goal is to provide consumers with what they seem to want, a destination in which to socialize, shop, and be entertained all in one. PREIT has seen an increase in sales/SF to $465 as well as a 165-basis point increase, year over year, in non-anchor space rising to 92.1%. Indianapolis-based REIT, Simon has teamed up with joint-venture partners Shinsegae Group and McArthurGlen Designer Outlets in its international expansion efforts which will involve focusing on high end, premium, designer locations to leverage the company to a better financial position. Simon has seen its NOI increase from 5.6% in the 1Q, compared to 3.8% in comparable properties, with sales averaging $615/SF, up $2/SF from this time last year. According to the company, the numbers would be even higher if observed on a NOI-weighted basis. Though performance ranges from mixed to positive for retail focused REITS across the board, they seem to agree that Class A properties should be the focus as they are the best vehicle to deliver optimal returns to shareholders.

Mall REITs Pursue Multiple Strategies in Dealing with Tenant Troubles