Pennsylvania Real Estate Investment Trust (PEI - Free Report) — better known as PREIT — has completed the sale of Logan Valley Mall in Altoona, PA. This has been made for $33.2 million, net of credits issued to the buyer. This marks the 17th low-productivity mall sold by the company, with the aim of enhancing its portfolio quality and balance sheet strength.
Per the company, the Logan Valley Mall generated sales of $324 per square foot. This is below PREIT’s portfolio average (exclusive of this property) of $475 per square foot as of Jun 30, 2017. It is presently anchored by Macy's, Inc. (M - Free Report) , J. C. Penney Company, Inc. (JCP - Free Report) and Sears Holdings Corporation .
As a matter of fact, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences, with online purchases growing by leaps and bounds. These have made retailers reconsider their footprint and eventually opt for store closures, of late. In fact, all three retailers — Macy’s, JCPenney and Sears — announced store shut downs in the recent past.
Further, retailers unable to cope with competition have been filing bankruptcies. This comes as a pressing concern for retail REITs, as the trend has been considerably curtailing demand for retail real estate space. In addition, the choppy retail real estate market is said to have led to tenants demanding substantial lease concessions.
In fact, year to date, the Retail REIT industry has underperformed the broader market. The industry has declined 5.2%, as against 10.2% rally of the S&P 500 Index.
The situation has also forced mall landlords to reconsider their portfolio quality, as well as make strategic efforts to turn their boring retail hubs into swanky entertainment zones, digitize the malls and turn those into distribution hubs.
PREIT, too, has resorted to a portfolio rejig, selling 17 lower productivity malls, as well as other non-core properties since January 2013. This helped the company reap more than $750 million in gross proceeds. Later this month, the company anticipates closing the sale of its stake in the 801 Market Street office condominium.
PREIT currently focuses on retail and lifestyle offerings, along with dining and entertainment options, at its properties. These assets are mainly situated in the Eastern United States, with concentrations in the mid-Atlantic’s top metropolitan statistical areas.
PREIT currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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