The Mall Trade


From JC Penney (JCP) and The Gap (GPS) to Williams Sonoma (WSM) and Abercrombie (ANF), America's malls are magnets for shoppers of all shapes and sizes. With so much to offer, you’d expect to find a trade - but wait until you read where our guys say it is.

The best trade can't be found next to Mrs. Fields. The fast money is being made by owning the mall itself.

Shares of retail real estate investment trusts -- or REIT's as they're known on The Street -- have jumped 30% a year in the past 5 years according to Bloomberg, (The S&P 500's annual rate of return was 6%.)

Steve Sterret The Chief Financial Office of Simon Property Group (SPG), the largest retail REIT in the country joins the guys for this conversation.

Dylan Ratigan asks him about the state of the American consumer.

Mr. Sterret replies that consumers look good. He says if the American consumer feels good about their prospect for employment, they spend money in the malls. (The latest numbers show the economy at near full employment.)

Why is the mall business almost immune from the housing debacle, high gas prices and all those other negative factors, asks Dylan.

Mr. Sterret explains that SPG caters to mid and upper level shoppers; companies such as Coach (COH) and Nordstrom (JWN) are the kinds of stores shoppers will find at his malls. Those tenants are less vulnerable to movements in gas prices.

Jeff Macke asks how susceptible SPG is to the consolidation in the department store sector?

Mr. Sterret says Simon owns about 20% of all US malls and consequently has a deep partnership with Federated (FD). However, Federated owns their own stores – so it’s the middle of the mall where Simon makes its money.

Dylan asks the panel if the stock is a buy?

Eric Bolling likes SPG, but thinks the stock is a little rich right now. He says it’s a buy around $100.

Guy Adami would own the stock right now.

Tim Strazzini and Jeff Macke agree but Jeff adds that investors should watch The Gap (GPS) and some other mall favorites. If they go private, Jeff thinks they will bail on their leases and that will be a problem for Simon.


Questions? Comments?

Trader disclosure:
On APR 11 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders. Bolling Owns Gold,Silver; Strazzini Owns (WMT)