Need A Shopping Mall? Landlords Are Selling Cheap

The landlords who hold the bulk of the nation’s malls would like to unload those fading centers that are failing to attract traffic in the era of eCommerce.

Whether or not they will be able to lower the price sufficiently to attract buyers remains an open question.

Given the less than stellar track record of shopping malls in recent memory, investors are not exactly lining up to buy into fading retail behemoths where no one wants to shop. In April, about $3 billion in retail real estate changed hands, down 27 percent from the prior year at the same time and the lowest monthly tally in five years, according to data from Real Capital Analytics, Inc.

Some properties can be saved – in some cases, their owners are investing billions to transform the mall of the past into the modern retail experience center of the future.

But some malls are simply too far gone and too remote to merit such an investment.

“It’s a tough environment. I don’t think anybody really anticipated the decline of the department store to happen as quickly as it did,” Joe Coradino, chief executive officer of Pennsylvania Real Estate Investment Trust (REIT), told Bloomberg. “The sellers are clearly on their knees.”

REIT has sold off 17 bottom-tier malls since 2013. The last deal, completed six months ago, brought in a $33.2 million transaction for the Logan Valley Mall in Altoona, Pennsylvania, anchored by Macy’s, JCPenney and Sears stores.

“I’m very, very happy I sold those malls,” Coradino said, noting is it likely he could not fetch as high a price today.

It’s hard to say exactly how many retail properties are out there awaiting purchase, according to reports. Publicly traded mall owners keep the details to themselves when it comes to which properties are liquidating and how the process is going.

“There’s definitely a pent-up backlog of malls the REITs want to sell,” said Thomas Dobrowski, an executive managing director at brokerage Newmark Grubb Knight Frank. “It’s just a matter of them getting over the hurdle of deciding to sell and having some catalyst that will give them a reason to sell into this market.”

But as prices are down 14 percent in the last 12 months, there is an incentive to hold properties rather than drive the prices lower by taking extreme lowball bids.

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