Analyst: Consumers Boost REITs

NEW YORK CITY-Consumer spending has held up for the year, prompting Bank of America retail REIT analysts to up their outlook on some mall and shopping-center companies, according to a report by the firm. The analysts, headed by Ross Nussbaum, have upgraded regional-mall REITs from to “overweight” from “slight underweight” and strip-center operators to “marketweight” from “underweight.”

Bank Of America upgraded four retail REITs from “neutral” to “buy,” including mall owners CBL & Associates, the Macerich Co. and Simon Property Group, as well as shopping-center own New Plan Excel Realty Trust. “The consumer continued to spend in moderation in 2006 despite higher energy costs, higher borrowing costs and a weaker housing market,” the report says.

The mall sector will be helped next year by fewer store closings and demand being driven by expanding new concepts, luxury chains, restaurants and international retailers. The report also notes that most mall owners have large development and redevelopment pipelines. Bank Of America has also lowered its cap rate expectations on class A mall sales by 50 to 75 basis points, estimating that they will trade in the 5% to 5.5% range.