Regional Mall REITs Ring Up Solid Quarter
Oct 31, 2007 1:34 PM
"We believe that Simon's malls will be relatively more insulated than some of its peers from the weaker consumer by virtue of the quality of its assets," wrote Bear Stearns analyst Ross Smotrich.
Simon estimates that for the whole of 2007, the company will post FFO per share of $5.88.
Bloomfield Hills, Mich.-based Taubman Centers posted strong results as well, with FFO per share of $0.68, a 19.3 percent increase from the third quarter 2006. Same store NOI increased 9.8 percent.
In general, analysts praised the REIT, but Citigroup's Jonathan Litt pointed out that Taubman's rental growth remained below that of its peers. Taubman reported rent growth of 1.9 percent in the third quarter, at $43.08 per square foot.
During Taubman's conference call, on Oct. 23, company president, chairman and CEO Robert S. Taubman said he remained optimistic about the upcoming holiday sales season, though he admitted third quarter sales performance was uneven within the company's portfolio. "There is no clear pattern to consumer spending across our centers," he said. "But every part of our business seems to be firing on all cylinders, so we are cautiously optimistic."
Taubman estimates that its FFO per share for 2007 will range between $2.83 and $2.87.
Analysts also got a pleasant surprise from Pennsylvania REIT (PREIT), a Philadelphia-based REIT, which operates 38 malls within its 34-million-square-foot portfolio, in addition to 11 strip and power centers. The company beat consensus estimates by $0.06 this quarter, with FFO per share of $0.32. The number represents a 5 percent increase from the third quarter of 2006 and the fourth consecutive positive quarter for PREIT, according to Morgan Stanley analyst Matthew Ostrower.
"We view the return of FFO growth as absolute prerequisite for the stock to begin performing at least in-line with the overall mall REIT peer group," he wrote.
As of Tuesday afternoon, PREIT stock was trading at $37.39 per share, 5.3 percent above its 52-week low of $35.50 per share. PREIT expects that its FFO per share for 2007 will range from $3.82 to $3.87.
Columbus, Ohio-based Glimcher Realty Trust, meanwhile, missed consensus estimates by $0.02 with FFO per share of $0.50, a decrease of 3.8 percent, but the miss represents growing pains, according to Lail. The company has been trying to rid itself of under-performing assets throughout this summer, in an effort to improve its portfolio, and it has lost some rental revenue as a result.
Glimcher's other vital signs, however, seem good, according to analysts. Same-store NOI increased 3.5 percent. Occupancy levels rose 130 basis points to 91.3 percent. Average rents grew 2 percent, to $25.89 per square foot. And average sales increased 2.5 percent for stores less than 10,000 square feet, to $364 per square foot, and 1.7 percent for stores less than 20,000 square feet, to $352 per square foot.
In a note on Oct. 26, Hilliard Lyons vice president Tony Howard wrote that he remains split on Glimcher's performance. "While we believe the company's strategy is the appropriate long term solution, the near-term impact on the bottom line may warrant Glimcher's stock selling at a discount," Howard wrote.
Glimcher expects that its FFO per share for 2007 will range between $2.04 and $2.10.
Even Feldman Mall Properties, which had been behind in its SEC filings since the beginning of the year, pulled through to reveal its second quarter results and announced some management changes, giving analysts hope the REIT might still turn itself around without resorting to a sale.
Analysts had a mixed reaction to news from Great Neck, N.Y.-based Feldman Mall Properties, which finally released its second quarter results on Oct. 26. The company, which operates seven malls totaling 7 million square feet, reported FFO per share of negative $0.12, compared to $0.20 in third quarter 2006, a decrease of 160 percent. Same-store NOI fell 0.9 percent.
During Feldman's conference call on Oct. 29, CEO Larry Feldman apologized to investors for the delays in reporting and the resulting lack of transparency, as well as the weak results posted by the REIT. Feldman already revealed that he will step down as CEO to focus on real estate operations, in his words, his main "strength," while Tom Wirth, who currently serves as CFO, will take on the position of president.
