Real Estate Investment Trusts (REITs) have become an increasingly popular investment vehicle for those seeking to invest in real estate without owning physical property. REITs are companies that own and operate income-generating real estate assets, such as office buildings, shopping centers, and apartment buildings. They allow investors to gain exposure to the real estate market without the high costs and risks of buying property directly.
One type of REIT that has gained significant attention in recent years is mall REITs. These companies own and operate shopping malls and retail centers across the United States. However, as Bloomberg reports, the funding stress on mall owners is mounting, and another shakeout for malls may be imminent. In this blog post, we will explore what REITs are, the pros and cons of investing in them, and highlight three companies that own malls: Simon Properties, Macerich, and Brookfield Properties.
What Are REITs?
REITs are publicly traded companies that own, operate, or finance income-generating real estate properties. They allow investors to invest in a diversified portfolio of real estate assets without owning the properties directly. REITs typically specialize in a particular type of real estate, such as office buildings, apartments, or shopping malls. They are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends.
The Pros and Cons of Investing in REITs
- Diversification: REITs allow investors to diversify their portfolios and gain exposure to the real estate market without owning property directly.
- Passive Income: REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends, providing investors with a steady stream of passive income.
- Liquidity: REITs are publicly traded, making them easy to buy and sell on the stock market.
- Volatility: REITs are subject to the volatility of the stock market, which can be affected by economic conditions, interest rates, and other factors.
- Management: REITs are managed by professionals who make investment decisions on behalf of shareholders. This can lead to conflicts of interest or poor decision-making.
- Fees: REITs may charge fees, such as management fees or expense ratios, which can reduce investors’ returns.
Three Companies That Own Malls
Simon Properties: Simon Property Group is the largest mall owner in the United States, with over 200 properties across the country. They own and operate a diverse portfolio of malls, including high-end properties such as The Galleria in Houston and The Forum Shops at Caesars Palace in Las Vegas.
Macerich: Macerich is a real estate investment trust that owns and operates a portfolio of shopping centers, including several high-end properties such as Scottsdale Fashion Square in Arizona and Tysons Corner Center in Virginia. The company has a market capitalization of over $8 billion.
Brookfield Properties: Brookfield Properties is a global real estate company that owns and operates a diverse portfolio of properties, including office buildings, apartments, and shopping malls. The company owns several high-profile malls, including the Grand Canal Shoppes in Las Vegas and the Water Tower Place in Chicago.
REITs offer investors a way to invest in the real estate market without owning property directly. While mall REITs such as Simon Properties, Macerich, and Brookfield Properties have experienced significant growth in recent years, the mounting funding stress on mall owners may lead to another shakeout for malls in the near future. Investors should carefully consider the pros and cons of investing in REITs before making any investment decisions.