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Pershing Square on The Outlook For Mall REITS

December 9, 2009

RetailTraffic Blog has posted a presentation by Bill Ackman’s Pershing Square Capital Management detailing the improving economic climate, and the optimism they feel with regards to well positioned mall REITs.

There are certainly signs of economic activity bouncing back, but the months after this holiday season will be very telling. On a macro level, we will need to wait and see if the one-month decline in unemployment numbers we experience (from 10.2% to 10%) has legs, or if we’ll back to increases following the new year. At a lower level, as far as retail is concerned, we’ll need to wait and see how many stores decided to close up shop following the holiday season.

If we can get through the next few months and see that stores have closed on a smaller scale, and unemployment starts to stabilize, then there is a good chance things will turn up. The problem with mall REITs however is that a really meaningful economic rebound will likely bring inflation and higher interest rates, which could ultimately raise capital costs and reduce net income.



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Categories: Commercial Real Estate Investing | Trends
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Comments
Joshua December 9, 2009


my only issue with this optimism is that consumer and investor sentiment is very negative and that doesnt bounce back overnight, as evidenced by the last survey after the surprisingly positive (and yet to be revised) unemployment data. even should sentiment bounce back, people arent earning more money and people still dont have jobs. so, short term, i dont see it happening. medium term, well know more in 3-6 months.

Square Feet December 10, 2009


agreed. I think this document relies to heavily on indicators which are showing improvement over a very short period of time. We really need to see more than 1-month of employment improvement to warrant taking a big gamble on Mall REITs.

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