Common wisdom holds that the Shopping Mall is on life support. I venture into maybe one or two a year, and my most recent ventures weren’t very encouraging. Two recent Wall Street Journal articles illustrate the complexity of repurposing.
First, in a January 24th article by Ester Fung, “Mall Owners Rush to Get Out of the Mall Business”, the Journal notes that even the big-names in the biz are making use of strategic default to get rid of underwater properties. Citing data from Morningstar, the story detailed that from January to November 314 loans secured by retail property were liquidated, totaling about $3.5 billion. According to the story, these liquidations resulted in losses of $1.68 billion. Washington Prime, CBL and Simon have all sent properties back to lenders in recent months. Ironically, these big players have seen no dings to their credit ratings, and the equity market in fact views these put-backs as evidence of financial discipline. On the downside, surrounding properties, such as out-parcels and other nearby retailers, such as restaurants, that depend on spillover from the mall, are suffering from the loss of shopper attraction.
The shopping mall is three different things. From a consumer perspective, it’s a place of gathering and consumption. Indeed, the loss of the shopping mall, which replaced Main Street, has sociological implications as well. Does Amazon.com now become a place of gathering as well as consumption? That’s an interesting subject for another day. Second, from a business perspective, the mall is a bundle of contracts, and sorting through those contracts will keep lawyers and real estate experts busy for some years to come. Finally, a shopping mall may be, in some circumstances, a valuable piece of real estate. Repositioning that real estate, either as retail with different tenants and focus, or as something other than retail, will be an interesting story in the coming years.
This post first appeared on From A Small Northwestern Observatory... | Finance, please read the originial post: here