Investors who shorted malls stand to make out big

Carl Icahn (Credit: Icahn by Neilson Barnard/Getty Images for New York Times; iStock; Matthew D. Wilson/Wikimedia Commons)

The coronavirus pandemic may be the final nail in the coffin for some retailers and shopping malls. For certain investors, that’s a good thing.

Those who shorted the mall-heavy CMBX 6 index are seeing their bets pay off faster than they thought as tenants come up short on rent and mall owners miss mortgage payments, according to Bloomberg.

MP Securitized Credit Partners is among the investment firms that bet the index would lose value. The firm’s MP Securitized Credit Fund lost 37 percent last year, but its short bet on malls helped it gain 53 percent in the first quarter.

“We expected this trade to play out over one to two years,” said principal Dan McNamara. “In reality, it played out in one to two months.”

While the stock market plunged, Apollo Global Management’s flagship credit hedge fund gained 6 percent through early April thanks to bets against the index. Investor Carl Icahn said he has “billions and billions of dollars on the short side” of the index.

As of March 20 some $9.4 billion was riding on the BBB- segment of the index — which has dropped 29 percent this year — both long and short. Another $2.3 billion is wagered on the junk-rated segment.

Among those that went long are mutual funds AllianceBernstein Holding LP and Putnam Investments.

One question investors are asking themselves is how long it will take mall retail to recover. Just a third of Americans surveyed by First Insight in mid-April said they will feel comfortable shopping at a mall when they reopen.

On the other hand, shares of some mall operators ticked up this week after Simon Property Group announced plans to re-open malls in some states. [Bloomberg] — Dennis Lynch

Tags: cmbs, Retail, shopping malls