The pandemic hit the retail sector harder than almost any other in real estate. Stock prices for the retail real estate sector were down over 50% at one point. The cruelty of the pandemic was widespread, but not equally distributed. Even within Retail REITs there were vastly different experiences. Shopping centers with grocery stores and other essential services stayed open. That was not the case for malls.

One year ago most malls were closed, and so were the shops in them. Big retailers like JC Penney and Brooks Brothers filed for bankruptcy. Many smaller stores couldn’t, or refused to, pay rent. Some investors wondered if the malls owners would go bankrupt as a result. The largest mall REIT in the world, Simon Properties, saw its stock price go from $142 to $48 in the first 30 days of the crisis, a drop of over 65%.

Retail REITs like Simon own the malls, but usually not the stores within them. They are the landlords—they rent space to the stores, usually in the form of multi-year leases. When the malls closed, the stores in them suddenly lost revenue, and yet they still owed rent—to the mall owners. In contrast, the landlords’ revenue stream remained intact, but only so long as the shops stayed solvent. REITs recognize this, and realize that in many cases they are in a stronger financial position than the retailer. They might be able to offer rent deferrals or other forms of support to the tenants. This is exactly what Simon did, giving over $400 million rent abatements in 2020, in hopes of helping their tenants reach better days.

Better days are now here. According to a recent WSJ article, foot traffic at a representative sample of 52 malls in March 2021 was up 86% from the same month last year. Malls are open, and consumers are flocking back. Occupancy – the amount of space leased out – at Simon’s 235 malls was 90% as of March 31^st, 2021. It is not surprising then, that retail REIT stock prices are recovering. Simon’s stock price is up to $113. Had an investor sold at the bottom, they would have missed out on a 149% return.

The history of the stock market offers investors plenty of lessons on the importance of discipline. 2020 has certainly added further confirmation.