Shopping Center REIT Execs Push Back Against Negative Fallout from Retailer Bankruptcies

“Reports of the Death of Retail Real Estate have actually been Considerably Exaggerated,”– Conor Flynn, CEO of Kimco Real estate

Retail REITs have been countering versus the onslaught of negative retail headings and analyst sentiments during the current round of quarterly earnings teleconference, with executives touting robust leasing, strong buyer foot traffic and tenancies, and even increasing rental rates.

“Reports of the death of retail realty have actually been considerably exaggerated, and Kimco’s strong first quarter is living evidence,” stated Conor Flynn, CEO of Kimco Realty (NYSE: KIM).”Our leasing volume has validated the success of our improvement in helping to offset the difficult retail environment the industry is presently experiencing.”

Simon Residential or commercial property Group Inc. Chairman and CEO David Simon stated the company continues to see strong demand throughout its portfolio, with occupancy at the company’s shopping mall and premium outlets standing at 95.6% at the end of the first quarter amidst solid leasing activity. Simon’s mall and outlet center retailers reported sales of $615 per square foot, a 30-basis-point increase to the previous year duration, and Simon said the typical base minimum lease increased 4.4% from a year earlier.

“I just believe the (unfavorable)nnarrative is a method ahead of itself,” Simon stated. “Traffic is strong, it was up throughout our portfolio where we determine it, however you know at the end of the day, we have actually all got to have a better experience for the customer because they’re a hard nut to crack. We’re annoyed just by the narrative, but not by what’s occurring in our service.”

While clothing sellers and other sellers have actually clearly underperformed, Simon associated much of the pain to over-leveraging and “financial maneuvering” by private-equity shareholders.

“We do think private equity has actually been more of a detriment, and by the way the majority of these men are my pals. But when you lever-up any company, whether it’s the shopping center service or the retail company, and you cannot invest in your product, then you’ve got an issue. We’ve seen a lot of that.”

Simon said he’s enthusiastic that retailers will reinvest in their shops, enhance their stock mix, and supply better service to their customers.

“This is the great narrative that is being definitely ignored by the national media,” he said.

Noting that shopping mall owners are under the exact same pressure to reinvest, Simon said space give-backs by outlet store are a terrific chance for the company to redevelop and re-lease space in its malls. For example, in the King of Prussia Mall, where JCPenney revealed the closure of its shop, SPG is preparing a mixed-use development that will not be clothing oriented.

“We might have saved that deal. We chose absolutely unquestionably not (to),” Simon stated.

Acadia Real estate Trust CEO Ken Bernstein added that “there has been a flood of news about retailing and retail realty, and while there is reason for legitimate concern, there is too much over-generalization going on.”

Bernstein attributed the existing round of retailer downsizings to a combination of factors, including once-strong chains that have lost their edge, others that have over-extended themselves or under-delivered.

Long-term secular shifts as a result of technology, including the continued development of e-commerce and price transparency, as well as the strong U.S. dollar and deflation in grocery rates are likewise aspects Bernstein pointed out in an organisation that has “constantly been Darwinian and constantly been cyclical.”

“If we as landlords choose our locations wisely and structure our leases attentively, then we ought to be relatively well insulated from these cyclical shifts,” Bernstein stated. “The good news is that with time, the rates subsidies in e-commerce will likely moderate and traditional sellers will have competitive omni-channel abilities that match their traditionals areas.”

It’s extremely most likely that essentially all successful online retailers today will have a strong brick-and-mortar existence in the future to lower their cost per acquisition, get in touch with their consumers and enhance margins, Bernstein added.

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