Friday, March 10, 2017


These 13 retailers are closing more than 1,500 stores in 2017

American malls are dying faster than you think — and it's about to get even worse.

J.C. Penney said it will close 130 to 140 stores in the next few months. “It’s having a negative effect on all REITs as J.C. Penney is one of the high-profile retailers closing physical stores.”

With Sears announcing 150 store closings and Macy’s shuttering 68 stores, investors in Real Estate Investment Trusts that own malls are paying close attention. (and they SHOULD!)

Wealthy brokers often protect wealthy investors... at the expense of union pension funds (e.g. police, fire, teachers, trades) and wanna-be rich types (e.g. those who have investments under $2 million or $3 million.

Walmart released the list of 154 stores across the U.S. that will close as part of the company’s “sharpened focus on portfolio management.” The 154 U.S. closures include 102 of its Walmart Express stores, 23 Neighborhood Market stores, 12 Supercenters, four Sam’s Club locations, six discount stores, and a partridge in a pear tree.

There is very little discretionary income remaining in the late-great middle class! Food, clothing, and sometimes shelter have absorbed what little chance remains in the pockets of the working-poor (formerly middle class).

REITs have drawbacks, including:

Sensitive to Demand for Other High-Yield Assets. Generally, rising interest rates could make Treasury securities more attractive, drawing funds away from REITs and lowering their share prices.

Property Taxes. REITs must pay property taxes, which can make up as much as 25% of total operating expenses. State and municipal authorities could increase property taxes to make up for budget shortfalls, reducing cash flows to shareholders.

Tax Rates. One of the downsides to the high yield of REITs is that taxes are due on dividends, and the tax rates are typically higher than the 15% most dividends are currently taxed at. This is because a large chunk of a REIT's dividends (typically about three quarters, though it varies widely by REIT) is considered ordinary income, which is usually taxed at a higher rate.

About one-third of malls in the U.S. will shut their doors in the coming years, retail analyst Jan Kniffen told CNBC Thursday. His prediction comes in the wake of Macy's reporting its worst consecutive same-store sales decline since the financial crisis.

Macy's closings could leave a trail of dead malls

And I say to myself, it's a wonderful world.

No comments: