Betting On A Big Mall Fizzle

The holidays are approaching. The money that comes into retailers’ coffers at brick-and-mortar locations will filter up to pay the landlord; the landlord will stay afloat.

Perhaps not.

There is a big bet riding on that “perhaps not.”

It’s become standard practice to point to retail store closings — numbering in the thousands so far this year — as evidence of a structural change in retail, moving toward eCommerce over in-person traffic. Black Friday, of course, looms as the beginning of a litmus test of the argument.

As reported by The Wall Street Journal, famed investor Carl Icahn is betting that mall operators will find it increasingly harder to pay their debts. The bet against those companies, through a process known as “short selling” and a focus on credit default swap, means that Icahn (and others) are betting that the CMBX 6 Index, which tracks roughly two dozen commercial mortgage-backed securities, will fall.

The index and the securities, the report said, are in turn tied to loans made in 2012. Some of the riskier debt has been on the upswing, which means that, along with a rise in the index, short sellers have been hanging on to an unprofitable bet. The bet seems a bit long-lived, as the short sale seems to imply that trouble will brew by 2022, in terms of servicing the mortgages due by that year.

“Though many malls and shopping centers have suffered deteriorating income, only three of the roughly 40 malls and shopping centers linked to the CMBX 6 have been delinquent on their loans since 2012, according to Trepp LLC, a real-estate data provider,” noted the WSJ.

Thus far, then, malls have been weathering the storm as they rotate different retailers into spaces — as one leaves, another fills the gap and keeps rental revenues intact, which means that mall operators still can keep their interest payments current.

But then again, more than 9,100 stores have closed this year, and per CNBC reports, Bank of America has noted that mall closures have reached more than 4,000 in 2019 alone, up more than 140 percent from 2018’s tally. Might momentum be accelerating toward a tipping point? The coming holiday shopping season might be a tell as to what lies ahead.

Sizzle

Contactless Cards: PSCU is anticipating a strong embrace of contactless cards in the coming year. The credit union service organization has already sent half a million contactless cards to members from 14 credit unions through national reissuance — and sees 3 million more cards being issued to more than 100 credit unions next year.

eCommerce: Target hits the mark in its latest earnings report, with eCommerce sales up 31 percent year on year, in the third quarter. Much of the growth, according to Target, came from the continued push into same-day delivery and buy online, pick up in store.

B2B IPO Listings: Call it a case of killing the paper check — in a public way. Firms that seek to streamline and digitize corporate transactions are planning to hold initial public offerings (IPOs). In one example, business payments processing company Bill.com is going public with a $100 million listing. In another example, Australian B2B FinTech Tyro Payments is also seeking a listing, with plans to raise as much as $172 million USD equivalent.

Fizzle

XRP Tokens: In further evidence that crypto sometimes finds favor as a tool for fraudsters, cryptocurrency forensics and analysis firm Elliptic has estimated that roughly $400 million worth of XRP tokens on the Ripple payment network is connected to illegal transactions. Ripple has countered that the tally represents less than 20 basis points of total transactions.

WeWork: Amid reports that the beleaguered real estate outfit may lay off a third of its workforce, WeWork is now also under investigation by the New York state attorney general. The AG is reportedly looking at whether Founder and CEO Adam Neumann may have made deals to benefit his own personal finances.

Big Tech: The investigations into Big Tech are gathering steam and multiplying. The Department of Justice, in looking at Facebook and Google, may look beyond antitrust violations and examine public safety, privacy, and consumer protection. The Federal Trade Commission has said that several investigations are ongoing into Google, Amazon and Apple, where previously there had been announcements about probes into Facebook and Amazon.