VCX is also doing a good job of proving that retail is not in fact dead (our hyperlinked note references DXS, where the much touted “death of the office” has a similar vibe.

AFFO continued to grow, albeit from a pandemic impacted base. Our point is not that rents are to explode (the long running woes of retail are likely still with us, namely occupancy costs that are too high, and rental structures that place too much of a burden on the lessee, with not enough risk sharing to the lessor) but rather than collapse from here is not on the cards. In our view, the sector has been priced for such a scenario.


Occupancy is sitting at 98.2 (which you can see if you squint in the below graph, under retail, peeking out there) in a backdrop of fairly strong retail activity, and exits from lockdown.


Likewise, leasing spreads continue to improve, in turn suggesting that the outlook for retail REITs has continued to improve.


And although cash collections are down, relative to the prior year (due to the rental waivers granted to smaller businesses, an unavoidable cost to VCX) they have again bounced back when lockdowns are lifted. Vaccines, and the reopening, are key, and we believe we have both in hand, longer run.

The balance sheet remains in good nick, with REIT’s having come a long way from the dark old days of material leverage.


Forward looking management commentary is robust, and embedded expectations remain modest.

We remain happy holders in our direct equity allocations.

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