STIFEL: Retail REIT Comp Sheets

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Retail REIT Comp Sheets 8/15/16

REPORT
REITs were down 0.15% last week, but are up 15.5% YTD. Retail REITs are underperforming the REIT index YTD, up 14.1%, as regional malls are up 12.3% and shopping centers are up 16.9%.
The REIT sector is trading at a 7.4% premium to NAV. Regional malls are attractively priced to the REIT sector, in our view, trading at a 9.4% discount to NAV while shopping centers are trading at a 6.4% premium to NAV.
 
Macy’s (M, $39.82, Hold; covered by our colleague Richard Jaffe) announced plans to close 100 full-line stores in an effort to drive growth. Macy’s currently has 728 stores, including 675 full-line stores. Most of the stores will close in early 2017, with the balance closing as leases expire and operating covenants are amended or waived. Macy’s stated that the value of the real estate exceeds their value to Macy’s as a retail store, which could be a positive for mall REITs. The locations of the 100 stores to be closed will be announced at a later date. Macy’s is concentrating its financial resources on its better-performing locations to improve the shopping experience and its online marketplace. The annual sales volume of the 100 closed locations, net of sales, expected to be retained in nearby stores or online is roughly $1 billion, with the EBITDA reduction offset by expense savings of the store closures. Macy’s has also been examining opportunities for four Macy’s flagship locations in various cities and is in negotiations to sell its Macy’s Men’s Store on Union Square in San Francisco for redevelopment.

Macerich (MAC, $84.48, Hold) and Ontario Teachers Pension Board amended the ownership waiver, allowing Ontario to own up to 19.9% of MAC’s shares from the previous 14.9%. Ontario Teachers currently owns 23.3 million shares of MAC, or 16.2% of MAC’s shares following MAC’s $1.2 billion of share buybacks. The amended waiver states that the ownership limit will be automatically reset to the highest beneficial ownership percentage actually reached by Ontario Teachers between August 1 and July 31, 2021, if the beneficial ownership does not equal or exceed 19.7% at any time during this period. If Ontario Teachers’ beneficial ownership hits 19.7% prior to July 31, 2021, then the 19.9% ownership limit will remain in effect.

Affiliates of Blackstone Real Estate Partners sold 42.4 million shares of Brixmor Property Group (BRX, $28.08, Buy) at $27.30. The sale completes Blackstone’s exit from BRX. Blackstone and other pre-IPO investors owned 83% of BRX at the time of its IPO in 2013.

Kimco Realty (KIM, $30.50, Buy) completed an offering of $500 million ten-year notes at 2.8%. KIM will use the proceeds to fund its previously announced redemption of $290.9 million of 5.7% notes, pre-fund $137.2 million of maturing mortgage debt at a weighted average interest rate of 6.32%, and pay down borrowings of $100 million on its line of credit.

Equity One (EQY, $31.68, Hold) entered a new ATM agreement for 8.5 million shares. EQY will use the proceeds to pay down debt, fund redevelopment activity, and/or potential acquisitions.
Pricing as of 8/12/16 close.