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Bullish On Retail REITs, Goldman's Watching Q3 Re-Leasing Spreads And Management Commentary

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Bullish On Retail REITs, Goldman's Watching Q3 Re-Leasing Spreads And Management Commentary
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The retail REIT Q3 earnings season kicks off on Tuesday, and shareholders are hoping for some strong numbers following a rough couple of months for REITs. Goldman Sachs analyst Andrew Rosivach said the firm will be watching re-leasing spreads and management commentary this quarter.

Goldman will be looking for any contraction in re-leasing spreads. Rosivach will be particularly interested in seeing if store closures by Macy’s Inc (NYSE: M) and Sears Holdings Corp (NASDAQ: SHLD) will have any immediate impact on re-leasing.

Re-leasing spreads in the 8–10 percent range allow opportunity for 4–5 percent EBTDA growth from REITs, but tighter spreads could spell trouble.

“During earnings we will look for companies’ commentary on the extent to which they believe they will be impacted by department store closures over the next year, and their perceived demand for that space,” Rosivach noted.

Related Link: 4 Charts To Watch In The Finance Sector

Goldman also expects commentary from Simon Property Group Inc (NYSE: SPG) and General Growth Properties Inc (NYSE: GGP)’s $243 million investment in Aeropostale in Q3. Rosivach expressed interest in hearing what management has to say about the potential long-term benefits of the investment.

Finally, Rosivach added that Goldman will be watching Buy-rated Taubman Centers, Inc. (NYSE: TCO) closely for any clarity on the REIT’s plan to increase NOI 30 percent by 2019.

Retail REIT earnings season kicks off on Tuesday when Tanger Factory Outlet Centers Inc. (NYSE: SKT) reports after the market close.

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Latest Ratings for SPG

DateFirmActionFromTo
May 2018Wells FargoMaintainsOutperformOutperform
Mar 2018JP MorganDowngradesOverweightNeutral
Feb 2018BarclaysMaintainsOverweightOverweight

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