Redefining Retail REITs: 3 Great Picks - Analyst Blog


If you are a retailer and want success in this era of technology, then look beyond the multi channel concept and embrace the omni-channel model. At least, the success stories from retailers around the world give us the impression that this red-hot model is the new trump card in the retail world.

But what exactly is this omni-channel method?

To put it simply, it is the method of selling products simultaneously through all available shopping channels such as brick-and-mortar stores, the Internet, mobile phones, television, radio, direct mail, catalog and so on.

This cross-border mechanism essentially foresees a customer showing interest in one channel, progressing and shifting to other channels and finally ending the transaction in another channel. So retailers need to effectively and efficiently operate both physical stores and online channels in tandem, and update information on a real-time basis across all these modes.

Not only is this unified customer experience redefining the marketing strategies of retailers, it is also removing the difference between a store and the Internet. Moreover, the once less attractive real estate - the logistic properties - are back in the limelight and the strict boundary between retail and logistic assets is becoming faint.

This is because retailers, in addition to growing their online presence, are focusing on developing their physical stores and using store network as an efficient distribution source.

REITs Leveraging on Omni-channel Concept

There's a whirlwind of change noticed in the retail REIT sector lately. Its new dynamics and transformation are drawing both customer focus and investor attention. Accepting the challenge that the e-commerce boom threw in its face, the REITs are now battling out lesser footfall in the brick and mortar shops by invading online retail sales. REITs are giving their malls a facelift to lure customers, transforming them from a boring shopping hub to swanky entertainment zones and distribution hubs.

As REITs strive to bring their mojo back, we handpick 3 stocks to add the Midas touch to your portfolio. These companies not only boast strong fundamentals but also remain abreast with the latest trends and continuously revamp their malls to pull crowds to their properties, enhance occupancy, keep their stores open and charge higher rents.

Simon Property Group Inc. ( SPG )

This week, Simon Property disclosed its brand re-launch and marketing program. Last month, the company also collaborated with a subsidiary of NRG Energy, Inc. ( NRG ) to install Electric Vehicle (EV) charging stations at its properties. It is embracing technologies to facilitate shopping and gifting as well as same-day delivery solutions and increasing the business mix to make their properties both retail and entertainment hubs.

This company enjoys a two-billion traffic and retail sales of over $70 billion annually at its properties, but is aiming to increase the figure by funding about $1 billion annually for redevelopment of its assets.  

Currently having a Zacks Rank #3 (Hold), the stock came up with positive earnings surprise of 6.25% in the first quarter on increased revenues and occupancy rate, hiked its quarterly dividend payout and raised its 2014 funds from operations (FFO) per share guidance. It also has a long-term expected growth rate of 7.1%.

Taubman Centers, Inc. ( TCO )

Also, this week, Taubman has announced the offering of a Business Class Internet access free of charge to its retailers (it is quite different from the other digital services, including free consumer Wi Fi).

Claiming to be the first in the regional shopping center industry to offer such a service to retailers, Taubman is essentially offering this service to woo the best retailers to its malls that pursue the omni-channel customer engagement strategies. This Zacks Rank #3 stock also has a long-term expected growth rate of 8.0%.

General Growth Properties, Inc. ( GGP )

In April, General Growth Properties collaborated with RetailMeNot, Inc. ( SALE ) for availing digital coupon facilities across its properties. Also, last year, the company teamed up with Deliv to offer same-day delivery services.

With a long-term growth rate of 9.40% and solid estimate revision trend, this Zacks Rank #2 (Buy) stock can prove to be a good choice in the years ahead, given the improving retail market fundamentals.

In Conclusion

The ultimate aim for retail REITs is to see higher demand for their space, by fulfilling the customer need of a one-stop shopping, dining and entertainment experience and finally have their purchases delivered to their homes on the same day.

We foresee this omni-channel transformation as ruling the retail REIT space in the years ahead. Companies wishing to make the most of this concept will have to leverage the growing opportunities of technology applications in the retail sector.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EV , GGP , NRG , SALE , SPG

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