He Who Hesitates Is Lost or "If You Wait for the Robins, Spring Will Be Over"

Thanks to TrafficCourt and David Bodamer who picked up William Ackman's ICSC Report in New York:
ICSC Mall REIT Presentation 12-7-2009


Some of the relevant highlights from the above report:

  • The U.S. economy has recovered
  • The U.S. consumer is beginning to bounce back
  • The credit markets have improved
  • Mall REIT balance sheets have strengthened
  • Cap rates have declined substantially
  • Store closure fears were overblown
  • Tenants are much better capitalized
  • Rent relief has been minimal
  • Tenant sales are down, but inventories are down even more while retailer cash flows have improved materially

Which would you rather own?

1) A 10-yr Treasury at a 3.4% yield
2) A 10-yr TIP at a 1.3% yield, or
3) Shares in a mall REIT at a 7.5%, 7.0%, or even 6.0% cap rate

Conclusions:
  • During one of the worst recessions in over 50 years, mall REITs and their tenants have proven to be highly resilient
  • Consumer spending does not need to return to 2007 levels for mall REITs and their tenants to outperform
  • Store closures of underperforming tenants is a long-term positive for the mall industry
  • Tenant cash flows and balance sheets have massively improved over the last twelve months
  • Many opportunistic retailers have substantial growth plans. Retailers on the sidelines are just like those investors who didn’t buy stocks in the spring
Looks like I'm not the only one who thinks that the market is turning for the better! Tell me what you think of this report - are Mr. Ackman and I out to lunch?

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