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Clean Bill of Health for Regional Mall REITs in Second Quarter

Fundamentals continued to improve for regional mall REITs during the second quarter of 2010, leading analysts to conclude that the sector had largely shaken off the aftereffects of the recession.

For the three months ended June 30, three regional mall REITs beat consensus analyst estimates on FFO per share and two were in line with expectations.

Only Santa Monica, Calif.-based Macerich Co. (NYSE: MAC) missed estimates, by $0.04 per share. The miss was due primarily to higher than expected interest expense and lower than expected income from joint ventures, according to Rich Moore, REIT analyst with RBC Capital Markets.

Indianapolis-based Simon Property Group (NYSE: SPG), Chattanooga, Tenn.-based CBL & Associates Properties (NYSE: CBL) and Bloomfield Hills, Mich.-based Taubman Centers Inc. (NYSE: TCO) beat estimates by a range of $0.02 per share to $0.05 per share. Columbus, Ohio-based Glimcher Realty Trust (NYSE: GRT) and Philadelphia-based Pennsylvania Real Estate Investment Trust (PREIT) (NYSE: PEI) met analysts’ expectations.

Even more encouragingly, Simon, Macerich and Glimcher reported rising same-store NOIs in the second quarter, ranging from a 0.4 percent increase for Glimcher to a 2 percent increase for Macerich. Regional mall REIT executives reported seeing a strong resurgence in leasing interest from tenants, which has pushed up leasing velocity in the past few months.

“I think you have seen [leasing] volumes pick up. And I am not calling it robust, but the retailers are making money, they’re talking, they are clearly coming to the realization that the supply of rate centers is limited,” said Macerich chairman and CEO Art Coppola during the company’s conference call with analysts on Aug. 9.

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