Why REITs are happy about bankruptcy of Sears?

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Why REITs are happy about bankruptcy of Sears?

October 17, 2018 - 10:48
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Real estate investment trusts (REITs) owing malls, where most Sears stores are located, have been waiting many years for the large retailer’s bankruptcy to renovate capacities and raise rent, Reuters reports.

Photo © Michal Jarmoluk, CC0 1.0

Real estate investment trusts (REITs) owing malls, where most Sears stores are located, have been waiting many years for the large retailer’s bankruptcy to renovate capacities and raise rent, Reuters reports.

Most large US malls are owned by such trusts that recently reduced exposure to Sears Holdings Corp., which filed for bankruptcy protection in the beginning of this week. The company is planning to close 142 out of 700 stores.

Shares of many REITs grew in the beginning of this week, as investors focused on potential benefits from Sears bankruptcy. Now trusts will be able to raise rent, which in some cases has not changed for 20 years.

It shall be noted that REITs’ stocks have been falling in recent years, as investors were concerned that online trade will kick physical malls off the market.

Besides Sears, such retail chains as Toys R Us and Bon-Ton Stores Inc. also announced their bankruptcy recently.

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