The hot months used to be prime time for indoor malls, but that segment's prospects had already dimmed before the pandemic turned off the lights for thousands of stores.
Many of America's malls are owned by real estate investment trusts (REITs), and their struggles have been well documented. Now, shoppers are emerging, and many are returning to their favorite haunts, or rather what's left of them.
But if you believe that every dog will have its day, including those that already have before, here are two mall REITs to consider, including one that's the big dog in this particular pack of commercial real estate players.
Simon Property Group
At the end of the first quarter, Simon Property Group (NYSE: SPG) owned or had an interest in 233 properties comprising 189 million square feet on three continents.
This mammoth among mall owners is not rolling over in the face of e-commerce competition either, adding an 80% interest in the Taubman Realty Group and its 24 malls and a 22.4% interest in Klepierre, a publicly traded, Paris-based real estate company owning shopping centers in 15 European countries.
While SPG seemed less than enthusiastic with the final deal for Taubman, that can't be said of its strategies for growth and survival going forward, including maneuvering to own top malls in top destinations and even buying its own tenants -- iconic names like J.C. Penney and Aeropostale -- outright and in partnership deals.
Around midday, July 6, SPG stock was trading at $127.11, good for a yield of 4.32% from an annual dividend of $5.60 per share. That's 7.02% off the 52-week high of $136.70 a share reached by the REIT on June 8 and more than double its 52-week low of $59.03 from July 27, 2020.
SPG also just raised its dividend by a dime, or 7.7%, to $1.40 a share after paying $1.30 a share for the previous four quarters. The company had slashed its dividend by more than a third last year, and it remains to be seen whether its evolving new strategies will contribute to more dividend and share price growth.
Earnings per share (EPS) indicates they're off to a good start, going from $0.48 in Q3 2020 to $0.86 in Q4 and, most recently, to $1.36 in Q1 2021.
Tanger Factory Outlet Centers
Despite it being a much smaller operation, the general public may recognize Tanger Factory Outlet Centers (NYSE: SKT) over Simon, since its name is on many of the 36 upscale open-air outlet centers it owns or partially owns in 20 states and Canada.
The company says those centers encompass about 13.6 million square feet and are leased to more than 2,500 stores operated by more than 500 brand-name companies, many of them upscale. And Tanger's fortunes appear to have turned with the return of shoppers.
"We are pleased that traffic to our domestic open-air centers reached 97% of 2019 levels during the first quarter of 2021 and exceeded 2019 levels in April. These strong results clearly reflect the attraction of our centers, their dominant market locations, and the value proposition that we offer to both our retailer partners and shoppers," the company's president and CEO Stephen Yalof said in its Q1 2021 report on May 5.
Tanger stock was trading at $18.76 around midday on July 6, good for a yield of 3.70% from an annual dividend yield of $0.71 per share. That's 16.27% off the mall REIT's 52-week high of $22.40 reached on March 4 and more than triple its 52-week low of $5.46 reported on Sept. 14, 2020.
Tanger suspended its dividend for a couple of quarters before restoring it at $0.177 per share in Q1 2021 and repeating that payout in Q2. That's still about half the payout of the past several years, but it's a start.
EPS is also relatively minuscule but at least in the black, going from -$0.25 in Q2 2020 to $0.14 in Q3, $0.003 in Q4, and $0.04 in Q1 2021.
The Millionacres bottom line
While the heyday of America's malls is long past -- and their struggles are obvious to the droves of would-be shoppers avoiding moribund properties full of vacant storefronts -- some look to be doing just fine, and their owners are, too.
With their solid balance sheets and business models, Simon Property Group and Tanger Factory Outlets look like equities that could be worth considering this month for those looking to take advantage of this trend.