General Growth Properties Inc. is the owner of some of the “highest income-generating malls in the United States”[1]. Now, its CEO is eying street-level urban retail, saying that he aspires to add this new facet to the company’s real estate holding at a forum in New York last week. The company, which owns 125 of the country’s top 600 mall properties, is also considering selling or “spinning off” some of its “weaker” properties. The company has been operating under bankruptcy protection for the past 18 months and plans to spend about $1.5 billion over the next three to five years to redevelop properties. These changes could include building outlet malls, but are unlikely to include the currently-trendy strategy of adding residential areas above the retail area. “I’m not a big believer in putting condominiums on top of my shopping centers,” said CEO Sandeep Mathrani.
Last week, the company announced plans to create a new real estate investment trust composed of neighborhood strip malls, office properties and “weaker regional malls”[2]. However, the announcement of this decision sent General Growth stocks down because it is unclear how much money the company would be able to get for its “lower-quality” assets. Pricing for such assets has been “all over the map,” explained Keefe, Bruyette & Woods analyst Benjamin Yang, so the idea of spinning off those assets may be intimidating investors even though the action will ultimately help the company balance sheet.
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[1] http://www.reuters.com/article/2011/06/09/us-generalgrowth-idUSTRE75809F20110609
[2] http://www.reuters.com/article/2011/06/03/us-generalgrowth-idUSTRE7525GR20110603
Retail at all levels will decline in the short term. The problem is demographics which is known to all. Until the “baby Boomer” generation passes from the society there will be little demand from an increasingly taxed and debt burdened next generation(s). The “Boomers” have consumed about al they are able and willing to for some time.
If I held malls or such I would consider revamping these into living centers for retirees that would take these retirees from the “empty nest phase” through assisted living and nursing home phases to come. Since this would probably involve taking the 4 bedroom essentially “in trade” these might be rented as possible, the balance torn down and land reverted to farm land as the growing need in the U S and world wide will be food and we have the wherewithal to produce and deliver food efficiently, economically and safely.
Another alternative would be to increase our immigration level (legally)and use those coming here to absorb the homes on some large version of rent to own or lease option basis.
All this will require new and innovative thinking. This will come eventually however shall we be prompt enough to recognise and undertake this type of concept.