The shopping mall, the paragon of American consumption, has been dying a slow death before and after 2008. Consumers are undeniably lured away by e-tailors and alternative retail outlets. But REIT's owning regional malls returned over 269% in the first quarter this year. How can we explain this?
Big box retailers are shifting and becoming smaller and more specialized. Shopping malls are also renovating and reconfiguring themselves Darwin style. Where empty malls are closed or up for sale, mega malls like The Mall at Millennia (TCO) and Simon's chain of outlets (SPG) don't seem to falter.
Here are Some Investing Ideas:
It's easy to diversify your portfolio by investing beyond cyclical department stores and specialty shops. Here's a quick guide to shopping the shopping mall. List Average 1-Year Return: 26%.
Simon Property Group SPG is a leading retail REIT, over half of it's portfolio is regional malls. It's planning to open a new shopping center in Texas with Tanger Factory Outlets Centers, Inc. (SKT). Keep watch on a recent lawsuit targeting CEO David Simon for pocketing over $120 million last year without shareholder approval.
3. Taubman Centers Inc. (TCO, Earnings, Analysts, Financials): Operates as a real estate investment trust. Market cap at $4.8B, most recent closing price at $78.27. Taubman Centers boasts significant sales per square foot in its luxury malls.
Their CEO Robert Taubman explains that customers come to highly branded stores such as Ann Taylor and Gap for the experience.
4. United Technologies Corp. (UTX, Earnings, Analysts, Financials): Provides technology products and services to the building systems and aerospace industries worldwide. Market cap at $69.31B, most recent closing price at $76.02.
This is a another huge company with over $5 in free cash flow each year. It owns Otis Elevator which contributes 32% of operating profit for 22% of UTX revenue. In the short-run, Otis is experiencing declining growth in China but is expanding its business in residential buildings and, of course, shopping malls. Other products you'd be buying into include Pratt & Whitney aircraft engines and Sikorsky helicopters.
5. Honeywell International Inc. (HON, Earnings, Analysts, Financials): Operates as a diversified technology and manufacturing company worldwide. Market cap at $47.02B, most recent closing price at $60.24.
Honeywell works with shopping centers around the world to provided integrated security systems. This includes those dome CCTV cameras inside stores.
6. American Tower Corporation (AMT, Earnings, Analysts, Financials): Operates as a wireless and broadcast communications infrastructure company. Market cap at $28.67B, most recent closing price at $72.55.
If you're bearish on mall properties, AMT is one of the few REITs that doesn't own any shopping malls or office buildings. It's portfolio is made up of cell-phone antennas, prisons, and data centers.
Keep in mind that the following REIT's also pay reliable dividends (90% of their taxable income).
Written by Freda Ding
Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Simon Property Group Inc. (SPG, Chart, Download SEC Filings)
- Tanger Factory Outlet Centers Inc. (SKT, Chart, Download SEC Filings)
- Taubman Centers Inc. (TCO, Chart, Download SEC Filings)
- United Technologies Corp. (UTX, Chart, Download SEC Filings)
- Honeywell International Inc. (HON, Chart, Download SEC Filings)
- American Tower Corporation (AMT, Chart, Download SEC Filings)
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