PROSPECTS FOR RETAIL REITS IN 2005

“Hold, hold, hold” the 200 or so fortress malls, recommend PricewaterhouseCoopers Ltd. and the Urban Land Institute in their joint report: Emerging Trends in Real Estate 2005. “Major mall REITs vacuum up most of the best centers. But sell power centers, which remain vulnerable to retail Darwinism, and neighborhood centers with weak supermarket anchors and/or located in markets vulnerable to supercenters.” The report represents the views of about 500 developers, institutional investors, REITs, lenders and real estate service consultants, more than 125 of whom were personally interviewed.

REGIONAL MALLS
Prospects Rating
Investment Fair 5.42
Investment Risk Modestly Good 5.68
Development Modestly Poor 3.97
Supply/Demand Balance Modestly Good 6.07
Expected Income Change 2005 2.1%
Expected Value Change 2005 1.3%
Deal Cap Rate 2004 7.2%
Buy: 9.1% Hold: 38% Sell: 52.9%
NEIGHBORHOOD/COMMUNITY CENTERS
Prospects Rating
Investment Modestly Good 5.90
Investment Risk Modestly Good 6.02
Development Modestly Good 5.88
Supply/Demand Balance Modestly Good 6.26
Expected Income Change 2005 2.2%
Expected Value Change 2005 2.3%
Deal Cap Rate 2004 7.7%
Buy: 28.9% Hold: 32% Sell: 39.1%
POWER CENTERS
Prospects Rating
Investment Modestly Good 5.59
Investment Risk Modestly Good 5.63
Development Fair 5.41
Supply/Demand Balance Modestly Good 5.79
Expected Income Change 2005 1.6%
Expected Value Change 2005 1.1%
Deal Cap Rate 2004 8.2%
Buy: 14.3% Hold: 28.2% Sell: 57.6%

Source: PricewaterhouseCoopers Ltd./Urban Land Institute

2004 RETAIL REIT RETURNS

These are the retail REITs that posted the strongest total returns, with 11 reporting gains above 40 percent, according to the National Association of Real Estate Investment Trusts. The top-performing regional mall REIT was Mills Corp. and the leader in shopping centers was Equity One Inc.

TOP 15
Name Property Type Dividend Yield Total Return
Alexander's Inc. Free Standing 0.00 72.47%
Mills Corp. Regional Malls 3.73 52.37%
Taubman Centers Inc. Regional Malls 3.81 51.71%
Equity One Inc. Shopping Centers 4.89 48.97%
The Macerich Co. Regional Malls 4.14 48.39%
Simon Property Group Inc. Regional Malls 4.02 46.66%
Regency Centers Corp. Shopping Centers 3.83 46.22%
Weingarten Realty Investors Shopping Centers 4.14 42.37%
CBL & Associates Properties Inc. Regional Malls 4.26 41.69%
Saul Centers Inc. Shopping Centers 4.08 40.84%
Federal Realty Investment Trust Shopping Centers 3.91 40.53%
Developers Diversified Realty Corp. Shopping Centers 4.60 38.86%
Kramont Realty Trust Shopping Centers 5.56 38.47%
HRPT Properties Trust Shopping Centers 4.72 38.12%
Equity Inns Inc. Shopping Centers 3.46 37.29%
Source: NAREIT

THE BIERI REPORT: LAS VEGAS

Las Vegas retail now rivals gambling and restaurants as a major attraction. Foot traffic on The Strip is phenomenal. The Forum Shops at Caesars have set a new standard with a recent expansion and luxury lineup, while, the sales performance has continued to perform over the top. Bellagio is still a luxury jewel. Steve Wynn, who is building his new resort with luxury shops and restaurants, hopes to raise the bar once again, just as he did with Bellagio. Fashion Show Mall tripled in size and serves the locals as well as the tourists. Desert Passage is still trying to find its place, while Mandalay Bay is steady, but not wonderful. The Venetian retail will double its size and continues to perform well. MGM and Tropicana have plans to add more retail shops. The planned Turnbury Lifestyle Center will bring a desired retail element to the south end of The Strip. How much is too much? This is yet to be determined. Of the non-Strip malls, Sunset is the best. As for other remaining retail venues Boulevard is in the shadow of The Strip, Meadows is slated to be redone and Summerland will be built.

LAS VEGAS
SHOPPING CENTER RANKING
Bellagio A
Boulevard Mall B-
Desert Passage B
Fashion Show Mall A-
Forum Shops at Caesars A+
Galleria at Sunset B-
Grand Canal Shops B+
Las Vegas Premium Outlets B
Mandalay Place C+
Meadows Mall C

The information presented for traffic estimates and regional malls is gained from a variety of sources used in developing the Bieri Market Reports. These sources are public and private, and may even include the developers themselves. When traffic counts are not available, grades are determined by reviewing sales of anchor stores and specialty tenants within a subject project, and then comparing those with like projects.