Market Overview

Morgan Stanley Puts The Spotlight On Shopping Centers

Share:
Morgan Stanley Puts The Spotlight On Shopping Centers
Related AAT
Mizuho's Take On Retail REITs Following ICSC Convention
Mizuho Makes Big Retail REIT Call, Picks 10 Favorites
American Assets Trust goes ex-dividend today (Seeking Alpha)
Related DDR
Mall Stocks Vs. Mall REITs: What's The Safer Bet?
Benzinga's Top Downgrades

On Monday, Morgan Stanley released a report previewing what investors should expect from upcoming Q1 2015 earnings reports from the shopping center REIT sector and including specifics on:

  • American Assets Trust, Inc (NYSE: AAT): $1.8 billion cap, 2.25 percent yield
  • DDR Corp (NYSE: DDR): $6.4 billion cap, 3.9 percent yield
  • Regency Centers Corp (NYSE: REG): $6.1 billion cap, 1.95 percent yield

Tale Of The Tape – Past Year

ms_-_ychart_aat_ddr_reg_apr_20.jpg

MS – Shopping Centers: Big Picture

  • Fundamentals Solid: MS reports anecdotal evidence that tenant demand still remains strong, despite a retail sales environment they described as still being "cautious."
  • Limited Supply: The lack of new shopping center development no doubt contributes to landlord pricing power and low reported vacancy rates.
  • Northeast Weather: MS expects to hear that snow removal and other weather related factors may have negatively impacted some shopping center Q1 SSNOI performance.
  • Quality Matters: MS is looking for 3 to 4 percent SSNOI increases in higher quality centers vs. only 2 to 3 percent for "lower productivity" REITs.

Related Link: Vaya Con Citi! A Puerto Rican REIT Tour

MS – Shopping Center Growth Trends

Regarding redevelopment, MS expects investors will be focused on redevelopment growth trends for each REIT since they have been accretive due to a wide spread – due to (higher) attained yields vs. (lower) cap rates.

MS noted that although new development is still lagging, two large grocery anchored REITs, Regency Centers and Kimco, both have new projects in the early stages of development.

Regarding M&A activity, MS mentioned the recent acquisition of Excel Trust for a 15 percent premium by Blackstone as potentially being the beginning of a trend. MS noted that six of the shopping centers in their coverage universe have market caps of $2 billion or less – potentially fuel for future M&A activity.

Related Link: Blackstone's Latest Acquisition Is A Vote Of Confidence

MS Expectations For AAT

MS expects "$0.42 FFO, +8 percent Y/Y, vs. Consensus $0.42" for American Assets Trust.

MS Call Questions:

    1. How aggressive are new store opening plans?
    2. Small shop leasing updates/progress?
    3. Any new development updates?
    4. Any color/guidance on 2015 SSNOI growth?

American Assets Trust is scheduled to report Q1 results AMC on April 28.

MS Expectations For DDR Corp

MS expects "$0.30 FFO, +7 percent Y/Y, vs. Consensus $0.30" for DDR Corp.

MS Call Questions:

    1. Any additional color on power center cap rates vs. grocery anchored centers?
    2. Any additional color on acquisitions and dispositions?
    3. Any updates regarding "struggling retailers" Best Buy, Barnes & Noble, etc.?
    4. What was the impact of lower gas prices on sales?

DDR is scheduled to report Q1 results AMC April 28.

MS Expectations For Regency Centers

MS expects "$0.72 FFO, +4 percent Y/Y, vs. Consensus $0.73" for Regency Centers Corp.

MS Call Questions:

    1. How aggressive are new store opening plans?
    2. Small shop leasing updates/progress?
    3. What is the outlook for new developments and/or acquisitions?
    4. Are grocers seeing any benefits from lower gas prices?

Regency is scheduled to report Q1 results AMC on May 6.

 
Image Credit: Public Domain

Latest Ratings for AAT

DateFirmActionFromTo
Nov 2016MizuhoUpgradesNeutralBuy
Jul 2016MizuhoDowngradesBuyNeutral
Apr 2016MizuhoInitiates Coverage onBuy

View More Analyst Ratings for AAT
View the Latest Analyst Ratings

Posted-In: blackstoneAnalyst Color REIT Previews Analyst Ratings Trading Ideas General Real Estate Best of Benzinga

 

Related Articles (DDR + AAT)

View Comments and Join the Discussion!