Regional Mall REITs Ring Up Solid Quarter
Oct 31, 2007 1:34 PM
The company's independent board members also formed an executive committee, headed by Bruce Moore, which will help Feldman implement its turnaround strategy and look for new executive talent. For the moment, the REIT will remain without a CEO.
"To be successful, the company needs to accelerate the pace of its redevelopment projects, and our board members recognized that our current structure was not working," Feldman said during the conference call.
Lail views the changes as a positive, but he also believes the company might end up becoming the target of merger and acquisition activity. Feldman already retained the services of Friedman, Billings, Ramsey & Co. this June to help it look at strategic alternatives, and with its stock reaching a 52-week low of $4.34 per share on Oct. 30, it continues to trade at a discount to NAV.
The rest of the sector, however, seems set for another good quarter. Even though Santa Monica-based Macerich Company, which released its numbers earlier today, missed consensus estimates by $0.01 (because of lower-than-expected land sales gains), its FFO per share grew 17 percent in the third quarter, to $1.15. Macerich also reported NOI growth of 2.4 percent, a 5.5 percent increase in sales per square foot, to $460, and a 50 basis point increase in occupancy level, to 93.5 percent.
While market observers expect slow retail sales growth going forward and the market has already seen some notable bankruptcy announcements this fall, including the Movie Gallery and Bombay Company, Inc., Lail thinks it will be some time before the mall REITs start feeling the effects.
"I would expect it would take a year and a half to two years for one retailer's stagnant sales to have a strong effect on a REIT's overall portfolio performance," he says. "And the same applies to bankruptcy."
Regional mall REITs that still have to file their reports include the General Growth Properties, which will report its results later today, and CBL & Associates Properties, Inc., which will report next week.
(Editor's Note: Next week's newsletter will examine shopping center REIT results.)
--Elaine Misonzhnik
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