Call me not surprised. Retail properties have seen plunging FFOs (Funds From Operations) from before the Covid crisis, but are now starting to crash and burn.
(Bloomberg) — America’s ailing malls suffered a pair of body blows over the weekend as two major landlords followed their ever-growing list of bankrupt tenants into Chapter 11 protection.
Pennsylvania Real Estate Investment Trust and CBL & Associates Properties Inc. sought protection from creditors Sunday, citing pandemic-induced pressures on their tenants and, in turn, themselves. Together the two REITs account for some 87 million square feet of real estate across the U.S., according to court papers.
The pandemic worsened an already dire situation for brick-and-mortar retailers, with a steady stream of chains falling victim as their customers shifted to online shopping. J.C. Penney Co., J. Crew Group and the owner of Ann Taylor are among the dozens of chains that have sought court protection since Covid-19 lockdowns throttled in-store shopping this year.
That’s an even bigger problem for the likes of PREIT and CBL, which own less productive malls than rivals such as Simon Property Group and Macerich Co., according Bloomberg Intelligence analyst Lindsay Dutch.
“There’s too much retail real estate in the U.S.,” said Dutch, a REIT equity analyst. “Retailers continue to reduce their store footprints, and while brick and mortar is here to stay, the focus is on high-quality locations.”
Of course, retail REITs are getting clobbered. On line retailers like Amazon have changed the brick and mortar shopping model. (Amazon in white, Macy’s in green, JC Penney in pink, and Sears in red.)
Pennsylania REIT saw Funds From Operations hit a peak in 2019 and got further clobbered by Covid.
CBL’s FFO has been steadily declining since early 2018 and crashed with Covid. There was a trading halt for CBL this morning.
And the once might BF Saul (not Saul Centers) got clobbered by Covid. Better call Saul if you are a shareholder after losing over 50% since March.
Or REITs should call Jerome at The Fed and ask for more stimulus.
On the Bitcoin, gold and US Dollar front, you can the declining dollar, rising Bitcoin and stalled gold prices.