What happened
Shares of mall real estate investment trust (REIT) Macerich (MAC -2.14%) rose as much as 15% on Tuesday. By roughly 2:30 p.m. EDT, the stock had given back some of that gain but was still sitting with an 11.5% or so advance. There was no news out of the company, which is set to report earnings before the open on Wednesday. Investors are likely expecting good things, however, thanks to the earnings news out of peers Tanger Factory Outlet Centers (SKT -1.42%) and Simon Property Group (SPG -1.03%), both of which have already reported earnings so far this week.
So what
From a big-picture perspective, 2020 was a terrible year for mall owners like Macerich, Simon, and Tanger. The pandemic resulted in nonessential businesses being shut down and consumers being asked to practice social distancing. Investors shunned mall stocks and for good reason, as the year was financially brutal. All three of these REITs trimmed or suspended their distributions. But things have started to turn a corner.
Image source: Getty Images.
Tanger, for example, is seeing customer traffic that's at roughly the same level as it was in the prepandemic period. Its occupancy is starting to move higher. And its average tenant sales were up 11.2% in the third quarter compared with the same trailing 12-month period of 2019. There's no question that Tanger's business is on the mend, noting that it increased its core funds from operations (FFO) guidance and hiked the dividend by 2.8%.
Simon's business is, perhaps, doing even better. CEO David Simon summed the third quarter up extremely well, noting that:
Demand for our space from a broad spectrum of tenants is growing. Occupancy gains continued, retailer sales accelerated, including our owned brands, and cash flow increased. Based upon results to date and expectations for the remainder of 2021, we are once again increasing full-year 2021 guidance and raising our quarterly dividend.
That would be the third consecutive guidance increase and the third time this year that the dividend has been hiked.
Based on the results of Macerich's competitors, investors are likely thinking that tomorrow's earnings update will bring some pleasing news and are bidding the stock up accordingly.
Now what
People like to shop, and going to the mall is, clearly, still an attractive way to do that. While the mall industry continues to work through some big-picture issues, including both the pandemic hit and the so-called "retail apocalypse", the general business environment is definitely on the mend. And that is being reflected in the stock prices of the best-positioned mall REITs, a list that includes Macerich, Tanger, and Simon.
