Mizuho's Take On Retail REITs Following ICSC Convention

The recent market volatility in the retail REIT space could be an overreaction to sluggish sales numbers from big-name retailers such as Macy’s, Inc. M and Kohl’s Corporation KSS. After attending the ICSC annual convention in Las Vegas, Mizuho analyst Haendel St. Juste believes better days are ahead for several top retail REITs.

Retail REITs, Malls, Shopping Centers

According to St. Juste, retail REIT investors and management have been surprised by the volatility in the space in the past month.

“Overall, the mood among landlords remains largely optimistic despite weak tenant sales, as tight supply continues to support fundamentals, especially for higher productivity landlords, while shopping/power centers [have] a ‘defensive’ edge,” St. Juste explained.

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He added that financing continues to flow smoothly for retail REITs.

For mall and shopping center REITs, tight supply is more than offsetting lackluster retail sales, and store closures are down significantly compared to last year. This tight supply is helping mall and shopping center REITs maintain precious pricing power within an unstable macro environment.

A Few Top Names

If the near-term, Mizuho expects volatility to continue, but the firm sees significant upside to several top names.

Mizuho has Buy ratings on American Assets Trust, Inc AAT, General Growth Properties Inc GGP, Simon Property Group Inc SPG and Taubman Centers, Inc. TCO.

Disclosure: the author holds no position in the stocks mentioned.