Simon Property Group (SPG) says it is “probably one of the few real estate companies that have effectively increased [its] 2008 guidance.” Their Q308 results indicate that retailers are slowing down, but they recommend taking the catastrophic numbers reported by tracking agencies with a grain of salt. They note that life insurance companies are hesitating to renew leases.
Not too bad overall for malls:
Occupancy in the mall portfolio was 92.5% as compared to 92.7% in the year earlier period despite the fact that square footage lost to bankruptcy for the first nine months of 2008 totaled 435,000 square feet as compared to 53,000 square feet during the first nine months of 2007.
Whom do they see struggling in the marketplace?
Q: Who's really out there in the market right now and who's pulling back?
A: A lot of life insurance companies are on hold for the rest of this year. We've been told by them they are anxious to replenish their investment next year. They are on the side lines… We anticipate them coming back into the market. It would be awkward for us to go through and list them. Other than that we've been a wonderful borrower from life insurance companies.
Basically we were up July and August and September was a tough month in terms of sales… There are a handful of retailers… that are essentially waiting to decide how much they're going to spend next year in terms of CapEx, kind of waiting to see what happens for the next three to four months. Some plans are on hold… In the better properties, demand is unabated. There are still people that are interested in coming into the better properties.
Cap rates are higher. Loan-to-values are lower and spreads are wider and we've clearly seen all three of those moves in that direction over the course of the last six to 12 months.
Questioning the popular data providers in the marketplace:
There are a number of firms that monitor and report shopper traffic and occupancy at US malls. These firms issue releases and are interviewed by national media sources purportedly as industry experts on the topic. I would like to go on record and state definitively that we do not report any data to these firms. I believe that several other owners of high quality retail real estate assets also do not participate. Therefore, I leave to it your judgment as to whether or not their data is representative of the industry and certainly not us.
