Mall owners are a natural fit into the retail category of real estate investment trusts (REITs), which as a whole has shown some pretty dramatic recovery from the "retail apocalypse" depths caused by the COVID-19 pandemic.
Nareit includes 29 of them in that group and says their average year-to-date total return was 39.47% as of Aug. 31 -- a far, happy cry from the -25.18% they posted for all of 2020 -- and the average dividend yield was 3.85%.
The two mall REITs we’ll take a closer look at here are hardly flying under the radar, but that’s probably a good thing right now. The Macerich Co. (NYSE: MAC) and Simon Property Group (NYSE: SPG) have had their struggles, but they also have the portfolios and experience to come through this rough patch as well as any in their space.
The Macerich Co.
As of late September, Macerich owned 49 million square feet of real estate, primarily in 45 what it calls "regional town centers." But not just any towns. They’re in what the company calls "many of the country's most attractive, densely populated markets with significant presence on the West Coast, Arizona, and the metro New York to Washington, D.C., corridor."
The four features (as of this writing) on the "Developments" page of its website are in Portland, Oregon; Broomfield, Colorado; Scottsdale, Arizona; and Walnut Creek, California. (The latter of which just saw a burned hulk of a house sell for $1 million, speaking to the kind of affluence needed to live -- and shop -- in that and many other parts of the San Francisco area.)
Macerich has some issues, that’s for certain. Our Reuben Gregg Brewer takes a close look at them here: "Is Macerich in Trouble?" But what the Santa Monica, California-based company has is nearly 60 years of experience -- including 27 as a publicly traded company -- and a collection of high-end malls in affluent areas that in normal times might even be called enviable.
Macerich’s quarterly dividend of $0.15 a share for 2Q21 marked its fifth straight at that level, after drastically cutting the payout from $0.75 and then $0.50 in the first two quarters of 2020. A miniscule payout ratio of 27.78% seems to hold promise for more generous payouts if momentum continues.
Macerich stock, meanwhile, was trading at $17.17 per share late day on Oct. 4 -- compared to 52-week lows and highs of $6.42 and $25.99, respectively -- and good for a yield of 3.45% and market cap of $3.7 billion.
And that one-year total return? A cool 121.57%, according to Nareit.
Simon Property Group
Simon says it’s a "global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations and an S&P 100 company." That includes retail properties in 37 U.S. states and Puerto Rico, as well as a total of 31 spread across Japan, Korea, Canada, Italy, Malaysia, Mexico, The Netherlands, Austria, France, Germany, Spain, Thailand, and the United Kingdom.
The company lists 99 malls among its U.S. holdings, along with 69 premium outlets, 14 centers under "The Mills" label, and four lifestyle centers. Like Macerich, however, Simon’s path forward is not clear, but things do seem to be getting better.
After slashing its dividend by 38% during the height of last year’s winter and spring shutdowns, Simon’s quarterly dividend of $1.50 per share for 3Q21 was a 15.4% boost from the year-ago quarter and 7.1% more than 2Q21’s payout of $1.40. A payout ratio of 65.86% also looks quite sustainable.
Simon stock, meanwhile, was trading at $133.64 per share late day on Oct. 1 -- compared to 52-week lows and highs of $59.35 and $137.38, respectively -- and good for a yield of 4.48% and market cap of $43.92 billion.
Simon’s one-year total return? An even cooler 126.73%, according to Nareit.
The Millionacres bottom line
Simon is big and getting bigger, acquiring a big chunk of its Taubman Realty Group competitor earlier this year and buying into the brands that help occupy its commercial space. Macerich, meanwhile, has a portfolio positioned in the kind of affluent areas that can appear to be weathering the pandemic economically better than many other places not so fortunate. Either or both of these mall REITs appear to be attractive real estate investments to consider falling for this October.