Retail REITs

The retail REITs are finding some pain given the AMP Rockingham shopping centre (motivated seller trying to meet redemptions having to move assets at a big discount to book) plus the big negative retail sales print (-3.5% month on month) from earlier last week.

The funny thing about diversified names like MGR is that instead of having just one problem, like a DXS, (which has office/WFH issues) you have multiple ones; like the outlook for residential, the outlook for retail (as per the AMP shopping centre issue) and the office exposures you (as the diversified REIT player) have.

Picking stocks within REITs based on a theme is usually hard, absent something enormous to differentiate you (e.g. when the pandemic hit it was deemed as “the death of retail”, and priced as such, which made the sector attractive, if you thought that after the pandemic life would return to normal, and that we’d all eventually go back to Westfield’s on the weekend).

The other key one is usually associated to the WALE/lease-type mix. For example, CLW and ARF have very long dated leases (+12yr in CLW’s case, ~20yrs in Arena’s case), and you can make a long duration / short duration trade. But for the most part these big obvious dislocations are few and far between, and when they happen, you can be most of what you already hold has moved (this is the “limits to arbitrage” perspective).

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