Our new take on the U.S. mall real estate investment trusts incorporates numerous headwinds facing the industry. We have reduced our fair value estimates for Simon Property Group (SPG) (to $145 from $191), Macerich (MAC) (to $58 from $73), and GGP (GGP) (to $19.40 from $26) and moved our moat ratings for all three to none from narrow. We've also raised our fair value uncertainty ratings to high from medium for Macerich and GGP, given those companies' smaller, less diversified portfolios and high leverage.
Former moat sources for regional malls included efficient scale and network effect. While we do see traces of these moat sources in each of the mall REITs we cover, our uncertainty surrounding the physical retail environment is too high to award an economic moat. We see a diminishing network effect for all three names, as retailers shift strategies and place less emphasis on physical storefronts, a primary result of the move to e-commerce.
Brad Schwer does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.