Mall REITs post strong performance in first quarter

Publish Date: May 01, 2013

Topics: cbl, funds from operations, general growth properties, glimcher realty trust, mall, reit, simon, taubman


Mall REITs performed well in the first quarter, posting funds-from-operations growth driven by improved same-center net operating income and occupancy rates. Simon Property Group boosted its FFO expectations for this year by 10 cents per share. “2013 is off to a good start,” Chairman and CEO David Simon told investors. “Occupancy increased by 110 basis points, and leasing activity remains strong.” This leasing strength, fueled in part by space demand from fast-fashion tenants such as H&M, Topshop, Uniqlo and Zara, is likely to continue for some time, Simon Property President and COO Richard S. Sokolov said.

Taubman Centers posted a first-quarter funds-from-operations increase of 20 percent year on year, to $81.5 million. “Sales from the quarter were strong across the board,” said Robert S. Taubman, the firm’s chairman, president and CEO. “In fact, we saw growth in 22 of our 23 merchandise categories — men’s and women’s specialty and men’s and women’s shoes were strong, as were electronics and home furnishings, as they have been for a while.” He also said that Banana Republic, Bath & Body Works, Gap, Foot Locker and Forever 21, were among the landlord’s best-performing tenants during the quarter.

Glimcher Realty Trust saw first-quarter funds from operations grow to $23.6 million, up from $17.8 million a year ago. “Retailer profitability remains solid, as we lost no national tenants to bankruptcy,” said President and COO Marshall A. Loeb. “Accordingly, we have the strong pipeline of new deals sailing into the Las Vegas RECon conference, and 2013 renewals are on par with historical trends.”

Funds from operations at CBL & Associates Properties rose to $85.9 million in the first quarter, from $72 million a year ago. Strong leasing at the company’s community centers helped drive the increase, and the firm is expecting that the upgrading of tenant mixes at its regional malls will fuel further gains, President and CEO Stephen D. Lebovitz said on an earnings call. “As the supply-demand dynamic has shifted more in our favor, we have increased our focus on upgrading tenant mix and productivity,” he said. “We intentionally allowed a number of spaces to become vacant where we saw opportunities to replace underperforming retailers with higher-quality stores. The new leasing spreads of almost 33 percent reported in the first quarter are indicative of the rationale behind this strategy.”

First-quarter funds from operations rose 13.6 percent year on year at General Growth Properties, to $252 million. “These results were primarily driven by [net operating income] growth and interest expense savings,” said CEO Sandeep Mathrani, “and are a testament to the high quality of our portfolio, the positive impact of leasing activity over the past couple of years, strict expense control and continued demand for stable durable cash flows from the lending community.”

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