Why savvy real estate investors are looking at mid-level malls

Certain conditions make the assets look a little more appealing

Jefferson Valley Mall
Jefferson Valley Mall

High dividends have some investors taking a second look at “class B” shopping centers.

Due to falling share prices, mall operators’ dividends have increased dramatically, some well over 15 percent, the Wall Street Journal reported. For example, Tennessee-based CBL & Associates Properties and Ohio-based Washington Prime Group saw dividends spike 19 and 18 percent, respectively, last year, even as shares nosedived

Still, the federal tax overhaul, coupled with rising income of consumers, could act in favor of mall operators. Changes to the tax law also mean income from real estate investment trusts will pass through to investors, possibly making these underperforming assets more appealing to investors.

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“It is within the strike zone of attractiveness and it certainly intrigues me,” Joel Beam, managing director and senior portfolio manager of Salient Partners LP, told the Journal. He added: “Investing in the equities at this point is for adults only.”

A recent report from Green Street Advisors found that J.C. Penney’s was particularly exposed to declines in Class-B malls, while rival Macy’s has been aggressive about closing low-performing stores in Class B and C malls. [WSJ] — Kathryn Brenzel