Mall REITs Store Value

It may be time to shop for mall REITs.

Fears about consumer spending have unjustly hurt mall owners this year, causing the sector to lag the overall performance of real estate investment trusts. That could signal a buying opportunity, so long as holiday retail sales aren't disastrous.

The misconception about mall owners like Simon Property Group(SPG Quote) is that their earnings are driven by consumer sentiment and consumer sales, says Deutsche Bank analyst Lou Taylor. However, only 2% of the companies' revenue actually comes from percentage rent that is tied directly to retailer sales, he says.

The bulk of mall REITs' profits come from long-term leases, which average about 10 years. The industry currently is benefiting from strong leasing and high occupancy rates because retailers have increased store openings and taken up space in quality malls. ...