Author Topic: DDS - Dillard's  (Read 14751 times)

MrB

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Re: DDS - Dillard's
« Reply #70 on: November 04, 2020, 04:20:38 AM »
Just a heads up for anyone following this closely.
Two mall REIT bankruptcies announced https://wolfstreet.com/2020/11/02/years-of-brick-and-mortar-meltdown-punctuated-by-pandemic-pushed-two-mall-reits-into-bankruptcy-cbl-pennsylvania-real-estate-investment-trust/

Just been digging through their financials to find proxies for Dillard's property values. Turns out 43 properties (5.8m sq ft) of Dillards in CBL malls with a lot of data on the sales per sq ft, rent/sq ft etc and they break it out nicely in terms of Tier 1 - 3 malls. Basically shows that rental income for the malls in which Dillard's sits the avg base rents are in the low $30 range, which will value Dillard's 43 stores at $1.7Bn-$2.4Bn (10%/7% cap rate). In sq ft (5.8m sq ft) this represents 12% of Dillard's 48m sq ft property portfolio. Dillard's EV is $1.7Bn today.

Anyway, point is these two bankruptcies might be interesting to some.

If I am understanding your post right, that isn't a meaningful comparison. The low $30 base rent average includes all the inline store space, which pay much more per square foot than the anchor boxes do.

Dillard's obviously owns and operates exclusively anchors.
We were kicking that around again just yesterday. Problem with that argument is that valued purely on base rent what the argument implies is that anchor space is worth between 10%-30% of non anchor space, making it by far the least valuable space in a mall. This contradicts the reason an anchor can get away with paying such low rent in the first place. In our view the argument has some legs to it, but it's not as simple as just comparing the rent per sq ft.

More problematic is what the $127/sq ft in sales for DDS says about the value of their property portfolio. Here the counter is the skew is significant, but unsurprising; 20% of their properties = 80% of the value.

As Gregmal pointed out; event driven idea, but in our view property is the downside protection and any way you cut it, it seems more than sufficient to us.