It was a busy earnings week for the 2CHYP portfolio with UMH, STAG, CBL, GOOD, and MAC reporting. We have earnings updates and commentary on each of them uploaded to the website in the portfolio analytics section.
The biggest event this week was the collective tone of the retail REIT conference calls. They all seem to believe that this is the bottom and that 2020 and beyond looks far healthier. Pennsylvania REIT’s (PEI) call today was the final piece of the puzzle and it hit the shorts hard. PEI is up 16% on the day and the other mall REITs came with it. CBL is up 14.5% CBL preferreds up between 6% and 9%. WPG gained over 8% on the day.
With a cost basis of $9.20 on WPG and $15.10 on CBL-E I think it is fair to say that I was way too early, but as bullish data keeps coming in I am increasingly convinced that I will eventually be vindicated on my contrarian call.
The key factor that changed today was that analysts had been modeling the recent tenant bankruptcies as a run-rate, whereas now it looks more like a 1 time event. Outdated retailers with far too much leverage needed to go and now that they are gone, fresher and healthier tenants are taking their place. In many instances the new tenants are even paying more rent than the failed anchors. Pennsylvania REIT noted a particular location where the new tenants are paying 9 times the rent.
We see WPG as 2 quarters behind PEI and CBL is about 4 quarters behind in terms of repositioning and re-tenanting their portfolios. PEI’s numbers serve as an early confirmation of Lou Conforti’s (CEO of WPG) guidance that WPG will see positive same store NOI in 2020.