What happened

Shares of real estate investment trust (REIT) The Macerich Company (MAC -1.22%) fell 14% in September, according to data from S&P Global Market Intelligence. That leaves the stock off by around 75% through the first nine months of 2020. That's better than the lows witnessed during the early-year bear market, but it's hard to suggest that a 75% decline is in any way good.

So what

Macerich is one of the largest publicly traded owners of indoor malls in the United States. Although its portfolio of 47 properties is highly concentrated in desirable locations, that hasn't meant much during the global coronavirus pandemic. The government effort to slow the spread of COVID-19 involved shutting nonessential businesses and asking people to practice social distancing. That left Macerich's malls shut down. In fact, at the end of September, it still hadn't reopened all of its malls, with three remaining shut by government mandate in California.   

A mother and a daughter at a mall

Image source: Getty images.

Not surprisingly, Macerich has had difficulty collecting rent from tenants that are themselves struggling to muddle through this difficult period. Unfortunately, not all retailers are doing a good job, with a number of high-profile names falling into bankruptcy. That's going to make it even more difficult for Macerich.

With COVID-19 cases picking up again, investors are worried that the REIT's malls will continue to struggle. But there's more to worry about here than just tenants paying rent, since a mall's ultimate value is its ability to attract consumers. Social distancing has made that very difficult, and it is likely to take time before foot traffic picks up materially again. The pullback in September is really just a recognition of the still-material headwinds that Macerich faces.  

Now what

Macerich owns very good properties, but that doesn't matter much if customers stay home and retailers continue to struggle. The mall sector has started to see some signs of life, but it's nowhere near pre-pandemic norms. On top of this, Macerich is carrying a relatively heavy debt load compared with more conservative peers. This is not a good choice for conservative income investors, who would probably be better off with a REIT that has shown more resilience during these trying times, like W.P. Carey.