U.S. Markets closed

Retail REITs GGP, Simon Property Collaborate with Life Time

Zacks Equity Research

Per news from PR Newswire, Retail REIT – GGP Inc. GGP – recently joined forces with Healthy Way of Life Company, Life Time, for changing the consumer retail experience at four of its properties through reimagining the mall spaces which are usually occupied by large anchor stores. The four properties include Baybrook Mall, Southeast Houston, TX, The Shops at Bravern, Bellevue, WA, Southwest Plaza, Littleton, CO, and Quail Springs Mall, Oklahoma City, OK.

GGP’s collaboration with Life Time is slated to create complete, resort-like healthy living, aging and entertainment destinations at these properties, which, in turn, are expected to drive traffic and sales. While initially four properties of GGP have been considered for this transformation, others are also likely to be added to the list.

In addition to GGP, Simon Property Group Inc. SPG also announced that Life Time is expanding its operations in Houston at The Galleria, in the earlier Galleria Tennis & Athletic Club space (GTAC).  

In fact, Life Time, the largest operator of indoor tennis courts in the nation, is aimed at making investments in the club in order to bring about a world-class tennis facility, together with an 8,000-square-foot fitness center having the best-in-class equipment and programs, as well as a restaurant.

The venture with Life Time comes at a point when mall traffic has been declining owing to a change in shopping patterns, with online shopping taking precedence over in-store purchase.

As a result, demand for retail real estate space has been diminishing of late, as changing shopping patterns are compelling retailers to reconsider their footprint and eventually opt for store closures or file bankruptcies. This has become a pressing concern for the retail REITs like GGP, Simon Property, Kimco Realty Corp. KIM and The Macerich Company MAC.

In fact, over the past three months, the Zacks categorized REIT and Equity Trust – Retail industry lost 3.8% compared with the S&P 500’s gain of 2.5%.

Amid this, mall landlords have decided to go to the mattresses. They are making efforts to turn their boring retail hubs into swanky entertainment zones, digitizing their malls and turning them into distribution hubs.

In addition, retail REITs are also coming to the rescue of distressed retailers – a move that can help them avoid bulk store closures – something that liquidation can lead to. This included Simon Property and GGP coming together for the acquisition of teen clothing retailer – Aeropostale – last year. Retail REITs have also been adapting to the latest technologies, in a bid to offer attractive services to tenants and mall visitors.

However, implementation of such measures requires a decent upfront cost. Hence, robust growth in profit margins of the retail REITs is likely to remain limited in the near term.

Currently, GGP and Simon Property carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Best & Worst of Zacks

Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>