A number of investors are going against the crowd and snapping up older malls on the cheap.The changing retail scene has led to a ton of uncertainty among landlords. Some retail bellwethers are struggling, and other retailers are rushing to adapt to changing consumer preferences. Add it all up, and it’s leading to changing footprints for traditional tenants in the world of brick-and-mortar. By extension, landlords are being faced with adopting the same adapt-or-die mindset, but that’s leading to a ton of opportunity for savvy investors.
As Investor’s Business Daily shares, some them are going against the crowd and snapping up older malls on the cheap. Discounted purchase prices lead to additional funds being available for much-needed aesthetic improvements. One part of the strategy is to seek out malls that may have seen better days in areas with no other enclosed shopping center within 50 to 100 miles.
"If the grim reaper hasn't come yet, then he's circling pretty good," explains Jim Hull, managing principal of Hull Property Group.
The Georgia-based has spent a good part of the last decade bringing distressed malls back to life. Earlier this year, the company was able to acquire the Hudson Valley Mall in Kingston, NY for $9.4 million - a massive discount from its 2010 appraised value of $87 million.
"If you own it at 20 cents on the dollar, you can provide tenants with very profitable stores, because you can give them cheap rents," says Andy Weiner, president of RockStep Capital.
The Houston-based company purchased the Bonita Lakes Mall in Meridian, Mississippi last year for $28 million, which is just a fraction of the $85 million the space cost to build back in 1997.
"We want to be in markets where the mall is still one of the more interesting things to do on the weekend," says Ami Ziff, director of retail at New York-based Time Equities,
Ziff and company have also taken advantage of the doom-and-gloom narrative that has been encircling the shopping mall industry. The company has purchased five enclosed malls since 2010 and hopes to expand its portfolio to 10 by the end of the year.
Chris Maguire, chief executive officer at Dallas-based Cypress Equities, is another investor that shares the enthusiasm for the opportunity presented by the dead-mall narrative - and that comes fresh off of its acquisition of a dated regional mall in Flagstaff, Arizona earlier this year. "We think there are somewhere between 100 and 200 malls out there that fit the general criteria. They need capital, but there's cash flowing, so you just sit and wait," he said.