C lass A malls are in trouble. This is, at least, according to various analysts that expressed dismay about Brookfield Property Partners’ $9.25-billion proposed deal to
acquire the rest of GGP at the end of March. The market signaled its disapproval of the deal as well, promptly punishing
retail REIT stocks in the wake of the news of the $23.50-per-
share purchase price.
The theory behind the upset is that it had been broadly
expected that GGP would trade at a higher price. The fact that
it didn’t—assuming shareholders approve the deal—thus points
to a decline in valuations across all mall stocks, including the
REITs that hold high-quality assets.
JPMorgan analysts said, “We think
the GGP news is negative for the
sector.”
RBC Capital Markets analysts
wrote that the deal’s pricing “sug-
gests to us a reset lower for pricing of
high-quality mall portfolios.”
And the analysts at BTIG pointed
out that “GGP management has clearly
stated on numerous occasions to share-
holders that its assets are worth sub-
stantially more than where its shares
are currently trading. We are surprised
that the special committee has unani-
mously approved the new offer and
recommends that GGP shareholders
approve the proposed terms.”
Only one voice was bullish about
the sector in the wake of the pro-
posed deal and her argument has
deeper implications for the sector. Trepp’s Jen Loukedis pointed
out that despite the headline news in the retail sector, there
have been year-over-year increases in inline store sales for such
REITs as Macerich, Simon Property Group, Taubman and GGP.
And the reason is simple: these REITs all have high-end tenant
rosters and eager customers willing to spend.
www.globest.com/realestateforum
RE-Commerce strives to reshape the outdated strip mall by shifting the focus
from parking and traffic toward walkability and social interaction. A variety of
seating configurations, combined with landscape and hardscape, create gathering
places while encouraging interaction with retail options. (Rendering KTGY
Architecture + Planning’s R+D Studio)
