Sorin Capital – Retail Contrarians - [Invest Like the Best, EP.68]

Jim Higgins: When you look at the numbers, the US commercial real estate market cap, if you will, is around 7 trillion. So to put that in perspective, the single family home market is around 22 trillion. Obviously the housing market's gonna be bigger, but 7 trillion is obviously a massive asset class. The New York Stock Exchange alone, also just put it in perspective, is around 19 trillion was the last number I saw.

Tom Digan: While the prospect of online retail sales making physical stores obsolete is certainly a good conversation piece, consider that the absolute dollar of traditional retail sales is actually higher today than it was in 2007, and e-commerce sales still represents only 8.3% of those total sales numbers as of the end of last year.

Rick: The department stores typically pay virtually no rent and the subsidy is in theory or at the onset of the business model was to the anchor department stores were the drivers of traffic, the primary shopping destinations. Therefore, that traffic would be to the benefit of all the small shop tenants who pay much higher rents. But today, that's been totally turned on its head.

Rick: I think there's no question that the influence of the passive flows have had, particularly in more concentrated spaces such as REITs and real estate has definitely had an impact. And I think you're assessment that has probably lengthened time horizons in general is probably also correct. That said, kind of thinking about this particular theme in trade as we're thinking about it, being cognizant of those factors as we are, we also think that the catalysts that we've identified are likely to make that time horizon more tangible.