Penn Wealth Publishing

2018.11.18 Penn Wealth Report Vol 6 Issue 05

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18 PeNN Wealth Report volume 6 issue 05 18 Nov 2018 Penn Wealth Report Copyright 2018. All Rights Reserved. iNvestmeNt intelligence Weekly BusiNess Report macerich has a creative NeW idea for its emPty mall sPace: let oNliNe iN ere have been plenty of stories recently about the "inevitable decline" of indoor malls in America. How far they've fallen— thanks to the mass migration to online shopping—from their heyday in the 1980s (Fast Times at Ridgemont High is still one of the greatest movies ever made). When you consider the mall anchor stores (Sears, Montgomery Ward, JC Penney, Macy's, Saks Fifth Avenue) which have either been seriously struggling or have closed shop completely, it's no wonder the big retail REITs have been looking for creative ways to keep their malls alive. Take $7 billion REIT Macerich (MAC $49-$51-$70, pronounced MAY sir itch), for example. e Santa Monica-based com- pany has been shedding its underperforming Class B and Class C malls to market itself as "the premier, pure-play, high-end mall REIT. Focusing on 54 distinct shopping "destinations," like the Country Club Plaza in Kansas City, Macerich is attempting to buck the accepted conventional wisdom of the industry's decline through bold strategic leadership—even if that means embracing their supposed enemy. rough a new program called "Pop-Up EXP," Macerich is experimenting with micro-leases to fill some of the unused por- tion of its 52.4 million square feet of space. A startup or an online firm, for example, could lease just 100 to 300 square feet of space to showcase their products. e com- pany, in return for the lease, will supply the modular pop-up hardware needed to be up and running in a matter of days, no con- tractors or designers needed. In addition to modular walls and shelving, the spaces can even include changing rooms and a storage area for inventory. And forget the three-year triple-net leases; a small company could sign up for just six or twelve months and then move out, leaving the space for a new company. is is an extremely creative idea, provid- ing benefits for all parties. e companies can showcase or test their goods in a phys- ical setting, mall visitors can see products they never would have found online, and Macerich can collect the rent on former- ly-unused space. As the buying trends of Americans continue to evolve, more REITs will undoubtedly go the way of Radio Shack, Claire's, and Sears. Others, through creative leadership, will continue to draw traffic to their locations. We would place Macerich squarely in the latter camp. Pacific Gas & electric may have kNoWN aBout sParks iN liNes Before deadly fire While everyone is rightly focused on the tragic loss of life and massive damage wrought on California by the still-raging fires, another aspect of the story has trial lawyers entering the scene by the bus loads. Based on unconfirmed accounts, Pacific Gas & Electric, the major subsidiary of $17 billion regulated utility PG&E (PCG $25-$33-$57), knew about potentially dan- gerous sparks being emitted from power lines right at ground zero of the fires—a day before the deadly fire erupted. e AP is reporting that an email was sent to a resident of Pulga, California requesting access to her property to check out sparks in the lines. It was near this woman's property, who was on vacation at the time, that the fires began, subsequently spreading to the town of Paradise. More than forty lives have been lost, 6,500 homes destroyed, and 117,000 acres burned due to the deadliest fire in California's history. While the exact cause is still unknown, PG&E did make a securities filing this week stating that electrical power equipment in the immediate area appeared to have malfunctioned. e parent com- pany also made an electrical incident report with the California Public Utilities Commission on the 8th of November, just minutes before the evacuation order went out to residents of Pulga. In PG&E's SEC filing, the company warned it would face potential liabilities beyond its insurance coverage should the equipment be deemed the cause of the fires. GoldmaN sachs falls oN NeWs of PoteNtial securities fraud We have never been fans of Goldman Sachs (GS $202-$205- $275), so we admit to enjoying this story a bit too much. It involves a state-owned investment fund, mas- sive fraud, and a plummeting GS stock price. 1MBD is a Malaysian govern- ment investment fund purportedly set up to invest in infrastructure projects in the country. Former Prime Minister Najib Razak just so happened to be the head of the fund's advisory board. Instead of bringing a big sum of money to the table for investment opportunities, like most funds of its type, 1MBD Weekly Business Report real estate: reits electric utilities caPital markets

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