Watch REITs to See How Data Explosion Is Changing Investing

Weeks before U.S. shopping-mall real estate investment trusts are due to report first-quarter earnings, alternative data provider Thasos has issued its own report on the state of the industry using real-time location data beamed from mobile phones.

In its 2019 Retail REIT Performance Update, expected to be released Monday, Thasos found that foot traffic growth that U.S. malls saw beginning in late 2017 has peaked, and in recent months, started to decline. In addition, contrary to analyst predictions, U.S. malls haven’t been invigorated by so-called experiential tenants such as Apple or Tesla.

Thasos, which was founded out of MIT’s Media Lab in 2011, aims to turn location pings emitted from cell phones into information that can be used to analyze individual companies, markets and global economies. The firm’s report shows how the exploding amount of non-financial data that has become available in combination with new data analytics techniques are transforming entire sectors of the markets.

Greg Skibiski, founder and chief executive officer of Thasos, says the firm’s insights into activities in the physical world can be compared with the information readily available online.

“Think of a retail location like Walmart as a web site,” he said. “You’d expect people to be tracking online traffic. Think about what Google knows. They know the ad that was clicked, when users leave a site without making a purchase and where they go from there. We’re doing this in the real world,” Skibiski added.

As an example, Skibiski says hedge funds and others are using Thasos’s information on foot traffic to determine the default risk of commercial mortgage-backed securities, which underpin REITs.

“Some people say 25 percent of retailers will close, but no one knows,” says Skibiski. “But some will default and it’s a matter of determining which ones,” he said.

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For the 2019 report, Thasos used a new measurement system, which includes the geographic areas where visitors are actually coming from, rather than simply including residents within a certain radius of the mall, which is common.

Thasos also found other mall trends reversing. So-called open-air malls with big grocery stores continued to outperform all other mall categories. But in 2018, the margin of the outperformance narrowed significantly. In addition, at the beginning of last year, small strip malls without big well-known stores began to outperform open-air malls with big-box retailers such as Best Buy. That was a reversal from 2017.

Thasos also can track customer demographics, such as average income, and loyalty, two widely followed measures that are big determinants of the value of mall REITs and retailers.

As part of the report, Thasos ranked REITs based on key metrics. For example, the top three enclosed retail REITs based on the growth in visits year-over-year were Westfield, Pennsylvania REIT, and Simon Property Group. The bottom three were Brookfield Property Partners, Washington Prime Group, and CBL & Associates.

The top three REITs based on median household income were Westfield, Taubman Centers, and Simon Property Group, while the bottom three were Brookfield, Washington, and CBL.