Pennsylvania Real Estate Investment Trust (PEI - Free Report) — better known as PREIT — is leaving no stone unturned to drive tenants and traffic at its malls. Recently, the company announced execution of flexible leases with fashion retailer, Love Culture, at four of its properties. The move comes as part of the company’s merchandise differentiation effort.
The company noted that the fashion retailer would open stores at Viewmont Mall in Scranton, PA; Woodland Mall in Grand Rapids, MI; Patrick Henry Mall in Newport News, VA; and Willow Grove Park in Willow Grove, PA. These stores will likely open before the holiday season.
Notably, Love Culture, which has an extensive online store, is known for its bold, on-trend pieces, inspired by celebrities and the runway, at affordable prices.
Admittedly, the shrinking mall traffic and store closures amid aggressive growth in online sales have kept retail REITs, including PREIT and others like Urban Edge Properties (UE - Free Report) , Macerich Company (MAC - Free Report) and Taubman Centers, Inc. (TCO - Free Report) , on tenterhooks. In addition, tenants are demanding substantial lease concessions owing to a choppy retail real estate market scenario.
Nonetheless, retail REITs are countering this dreary situation and putting in immense efforts to enhance the productivity of malls, by trying to grab attention from new and productive tenants, and disposing the non-productive ones on the other hand.
PREIT, too, along with its remerchandising efforts, has resorted to a portfolio rejig, selling low productive assets and investing heavily in refurbishments and remerchandising to unlock embedded property value. In fact, Love Culture’s expansion of store base also acknowledges the importance of having both online and brick-and-mortar store presence to augment business for retailers.
Although such steps will likely help PREIT efficiently tide over the lackluster retail real estate market, portfolio-redevelopment measures entail considerable capital and tend to drag margins in the near term. Moreover, rate hike adds to its woes.
PREIT currently has a Zacks Rank #5 (Strong Sell). Its shares have underperformed the industry it belongs to, in the past three months. The stock has lost 19.1% of its value, while the industry declined 11%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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