I’m still confident in my short position on commercial real estate (CRE). But it’s somewhat reassuring to see a major outlet like Forbes publish this piece. I’m not rooting for these guys to go belly-up. But I think some of them will, which would really hurt CRE REITs. Highly-leveraged ones are especially vulnerable, like Simon Properties (SPG) with a 5.4 debt/equity ratio. So I’m placing my bets accordingly. “It’s not personal Sonny, it’s strictly business.” -M. Corleone. On to the snippets:
More pain is on the way. One-third of U.S. women recently surveyed by America’s Research Group said they plan no clothing purchases–none–in 2009. Normally, it’s just 4%. That means the market is still far too saturated with stores.
Interesting survey. Most rational people realize that 90% of America is in extreme belt-tightening mode, yet analysts still seem shocked by the decreased spending.
Expect closings and bankruptcies to rattle the likes of Lane Bryant, Gap, and Starbucks. It’s the inevitable counterpunch to the days of retailers fighting hand over fist for market share during an era of loose credit and minuscule interest rates.
Personally, I wouldn’t have thrown those guys under the bus by mentioning them in the same sentence as the b-word. But yeah, even great retail brands like the GAP may have to close stores. The bad ones will liquidate, leaving debt and empty stores that will add to CRE’s issues.
Disclosure: Short SPG, IYR, JPM (puts), GS. No position in any retailers.