Bank of America says buy these 3 mall REIT stocks and avoid 4 others

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Bank of America’s biennial demographics report on mall REITs looked at several factors to determine which are performing the best, and the worst.
The report looked at the seven mall REITs currently traded: CBL & Associates (CBL), Macerich (MAC), Pennsylvania REIT (PEI), Simon Property Group (SPG), Taubman Centers (TCO), Unibail-Rodamco-Westfield’s US assets (URW), and Washington Prime Group (WPG).
The top three REITs were URW, TCO, and SPG, and the bottom four were MAC, PEI, WPG, and CBL.
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A recent report by Bank of America analyzed major mall real estate investment trusts (REITs) in the US to determine how the sector has been weathering the current economic climate and which factors predict future success.

The portfolios in the study include: CBL & Associates (CBL), Macerich (MAC), Pennsylvania REIT (PEI), Simon Property Group (SPG), Taubman Centers (TCO), Unibail-Rodamco-Westfield’s US assets (URW), and Washington Prime Group (WPG).

The leaders in BofA’s analysis were URW, TCO, and SPG, and MAC, PEI, WPG, and CBL were ranked in the bottom.

To determine this ranking, the bank considered demographics — median household income, household density, educated portion of the population, and owner-occupied home value — as well as how many traditional department stores were in each portfolio.

According to the report, major anchors that have had the most success “attracting productive and unique in line tenants” are Nordstrom, Saks Fifth Avenue, NeimanMarcus, Macy’s, and Bloomingdale’s.

Other measurements included in the analysis were market penetration and dominance

Another major consideration for BofA was proximity to the top five major US metros are New York City, Los Angeles, Chicago, Dallas, and Houston.

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“We believe the dominant malls focused market share in many of the largest US markets has translated into pricing power and enhanced rent and earnings growth,” the report reads. “The top mall REITs typically established lead ownership positions in key metro markets during earlier period of consolidation.”

SPG has maintained its lead ownership position, according to BofA.

To rank each portfolio, Bank of America weighed the combined demographic variables by 30%, anchor quality by 20%, major market penetration by 30%, and major market dominance by 30%.

Despite ‘migration,’ density remains a positive

As a result of the pandemic, the migrational trend from densely populated metros to smaller markets has accelerated. However, BofA said it believes density will remain a positive attribute and will continue to drive success for malls.

“Even as migration toward lower density markets pulls consumers away, we believe the most productive malls will remain in the densest markets,” the report reads.

The pandemic will, however, accelerate store closures at weaker malls with brick-and-mortar stores that were already struggling to pivot strategies.

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Source:: Business Insider


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