Just need a summary of this.

Mall REITs: Too Risky Or Good Value For Money?

The challenges the retail sector has been facing lately, including bankruptcies and extensive store closures, may have prompted some investors to look elsewhere. But others are taking a look at the drop in share prices for real estate investment trusts focused on retail properties and wondering if what they see is less a sign of trouble than it is an opportunity for a good bargain.

Retailers announced 5,300 store closings by June 20 making 2017 the second-worst year on record at the mid-year point, according to CNN Money. The retail sector of commercial real estate has been affected as well. Retail REITs were the worst-performing real estate investment trusts this year, the Wall Street Journal reported in June. They fell 15.6% even as REITs gained 1.6% overall and the S&P 500 rose 7.7%.

The closure of an anchor store like Macys, Sears or JC Penney can be especially difficult for a mall, since those are the stores that tend to attract consumers. Mall REIT Simon Property Group said in a securities filing that some of its malls depend on anchor stores or other major tenants to attract shoppers and could be adversely affected by the loss of one or more such store. Lea Overby, a managing director of research at Morningstar Credit Ratings, told the L.A. Times that when an anchor store goes belly-up, the mall owner is left with a box that is incredibly difficult to fill.

But some investors are taking a chance anyway, seeing the value in picking up mall REIT shares while theyre down.

This is one of the most attractive investment opportunities these days, Matthew Werner, managing director at Houston-based wealth management firm Chilton Capital Management told the Wall Street Journal. Class A malls are one of the most profitable distribution centers for retailers.

John Snowden, portfolio manager for Philadelphia-based real estate firm Resource Real Estate, told U.S. News & World Report that department stores like Sears and Macys typically pay less rent than specialty retailers, adding that occupancy rates in the past year or two have been around 95% for A-grade and many B-grade malls. "Although many of the department stores have closed their operations, the regional mall owners haven't been idle," he said in the interview. "They've been backfilling this space, putting in tenants paying three or four times the rent of what the department store does."

We took a close-up look at a couple of malls owned by mall REITs to see whats really going on.

Florence Mall | Florence, Kentucky

One of the Sears stores shutting down the latest round of closings will leave Sears Holdings with just over half the number of stores it operated in 2012 is an anchor store at the Florence Mall in Florence, Kentucky.

The financing for the mall, which was originated by the Royal Bank of Scotland, is the third-largest loan in a $993 million CMBS deal, WFRBS Commercial Mortgage Trust 2012-C7. The top three loans in the deal are all shopping centers with many of the same chain retailers, and make up a combined 36% of the deal value.

Florence Mall is owned by General Growth Properties, a big mall REIT with big redevelopment plans.

GGP has already redeveloped 115 department stores that used to be mall anchors, and it plans to redevelop 100 more in the next few years, Reuters reported. Malls can do well if they offer the right mix of products and retailers, effectively turning the shopping center itself into one big department store, GGP CEO Sandeep Mathrani said in June.

"We've done this 115 times, Mathrani said at the investor forum 2017 REIT Week. "We have a pretty good idea that it actually works."

Glenbrook Square Mall | Fort Wayne, Indiana

The Glenbrook Square Mall in Fort Wayne, Indiana, is home to Sears, Macys, JC Penney, Rue 21, GameStop, Payless, Childrens Place and Claires, all of which are closing stores or have been identified as being among the most troubled companies on S&P Globals list of retailers.

Glenbrook was financed by an $820 million loan crossed with about three dozen other properties. Goldman Sachs originated the loan in 2015, and it was then assigned to Wells Fargo and securitized in the CMBS deals GS Mortgage Securities Trust 2015-GS1, which contains three delinquent loans (though Glenbrook Square Mall is not one of them) and Citigroup Commercial Mortgage Trust 2016-GC36.

The Goldman Sachs CMBS deal also includes another mall with troubled retailers: South Plains Mall in Lubbock, Texas, whose stores include Sears, JC Penney, GameStop and Claires. To the extent that malls are considered uncertain investments in the current retail environment, this highlights the uncertainty investors are exposed to when commercial mortgage-backed securities are backed by multiple properties containing the same retailers.

Glenbrook Square Mall is owned by Seritage Growth Properties, a REIT spinoff of Sears Holdings that was announced by Sears CEO Edward Lampert in 2015. The spinoff involved selling over 230 Sears and Kmart stores to Seritage. Though Sears has been leasing back much of the space, Seritage has the right to take it back and rent it out to other tenants at several times the rent. The financial goals of Sears and Seritage, then, are not necessarily aligned, given that Sears closures could potentially damage the retailer yet benefit the REIT spinoff.

So should an anchor store closure be a red flag for a mall and those with a stake in it, including retail property owners and lenders as well as investors in mall REITs or CMBS deals? Or is it an opportunity to redevelop the space and make even more money, possibly by turning the mall into more of an experiential entertainment site than a pure shopping experience? Ultimately, the answer to both questions is sometimes, and the risk tolerance of investors and commercial real estate players will likely be one of the most significant factors in whether they see the cash register as half-empty or half-full.