Category Archives: MAC

REITs: It’s Complicated

In an article titled “Retail REITs: Double-Digit Yields, Secular Shifts And Mean-Reversion” (link), it was recently proposed that:

“If you believe in a mean-reversion, REITs with sound balance sheets and strong value drivers should be considered in the portfolio.”

This quote on REITs seems accurate if you’re willing to overlook that publicly traded REITs have existed since the late 19th century.  Since that time, there have been many fits and starts and resets making for a complicated outcome in the publicly trade REIT market.

In the same article, a graph was presented to demonstrate the general ebb and flow of the REIT market, or markets in general, that graph is illustrated below:

image

Following this graph is the mention of Macerich Co. (MAC) with the following remark:

“Let's take MAC as an example here. In my recent article "Macerich: 2 Scenarios Of Default - Positive For Value Investors", I calculated that MAC trades at a significant (at least 75%) discount to its NAV. It is hard to believe that such a discount will exist forever.”

The reality of this specific example [MAC], on a total return basis (adjusted for dividends and splits) is far from the ascending average with a range in price from undervalued to overvalued extremes. 

Below is the history of Macerich (MAC) from 1994 to the present:

image

Macerich Co. (MAC) could be exceptionally undervalued and likely to survive the current market malaise.  However, on an adjusted basis, MAC has recently been where is has been in 2008, 1999, and 1995. 

So while the prospects are bright for Macerich Co., if we excluded the complicated history of publicly traded REITs and that on an adjusted basis MAC does not have an ascending average over time, there is a limit to what an investor should be willing to accept in exchange for the hard earned capital.

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