Build Back Poorer: Mall Values Plunge 60%

About $4 billion in value was erased from 118 retail-anchored properties with commercial mortgage-backed securities debt after reappraisals triggered by payment delinquencies, defaults or foreclosures, according to data compiled by Bloomberg.

That average drop — which reflects the change in value since the debt was originated years ago — may underestimate losses when the properties come up for sale because so much retail real estate is in distress. And few buyers are willing to take risks on aging shopping centers as e-commerce continues to grab market share.

“It’s an eye-popping decline,” Gwen Roush, an analyst with DBRS Morningstar rating service who tracks commercial real estate, said in an interview. “When we’re forecasting a loss on these malls, we’re even further haircutting that value.”

The biggest owners, such as Simon Property Group Inc., Brookfield Asset Management Inc. and Starwood Capital Group, have started to triage properties, walking away from money-losers while reinvesting in viable locations.

Hard-hit centers were already decimated by department store bankruptcies and high vacancy rates, before Covid-19 accelerated Americans’ taste for online shopping. Vaccines and herd immunity are unlikely to lure visitors back to deserted gallerias perfumed with Cinnabon bakery treats.

Quality Gap

Only about half of the 1,100 U.S. indoor malls have a good chance of survival, according to Floris van Dijkum, a real estate analyst with Compass Point Research & Trading. The strong will get stronger while the weakest face abandonment, he said.

“There’s a huge bifurcation between good and bad quality,” van Dijkum said. “By value, 80% is in the top 300 malls.”

Simon, the country’s largest mall owner, is working with loan managers to restructure debt on underperforming centers or hand back the keys.

“Hope to make deals in some,” Chief Executive Officer David Simon said on the company’s latest earnings call. “If not, then they will no longer be part of our portfolio and we wish that new owner the best of luck.”

BIGGEST LOSERS

OwnerShopping Center2020 AppraisalDecreaseKushner Cos.229 W. 43rd St.$92.5 million-$377.5 millionCBL & Associates PropertiesTriangle Town Center$27.7 million-$257.3 millionSimon Property GroupTown Center at Cobb$130.4 million-$191.6 millionPyramid Management GroupPoughkeepsie Galleria$68.6 million-$168.5 millionSimon Property GroupSquare One Mall$50.5 million-$150.5 millionSource: Bloomberg CMBS data

Outside Atlanta, Simon’s Town Center at Cobb, once appraised at $322 million, received no bids at a courthouse foreclosure auction in February, according to a local news report. The company’s Montgomery Mall, near Philadelphia, was appraised at $61 million last year, a 69% drop from its 2014 value.

What do you think?

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Hanifah
1 month ago

That retail model is dead and will soon be replaced with homeless shelters, where the scourge of society live off a world of Woke MMT hustlers. 

Rey
Rey
1 month ago

Another multi-trillion dollar “stimmie” bill should do the trick to solve the commercial real estate catastrophe.

Firepole
1 month ago

I thought the new law allowing shop lifting up to $700 would help!? 

laser
1 month ago

They will shelter homeless starving Americans….

Crasher K
1 month ago

Thats jogger youths territory. All the liberal chains like Macys and Nordstroms can thank their sjw support for their drop off a cliff in foot traffic. 

RV
RV
1 month ago

And the winner is…………………………………………..AMAZON

Rudi Mentary
1 month ago

Obiden said he and kampala are going to fix it.
To $1,600 per month to pay for the millions of illegals they are flooding into the country.

V for Vendetta
1 month ago

The middle class is perishing… people paying $1200 a mo. for health insurance don’t have money for recreational shopping.

Crasher K
1 month ago

I think we all know why malls are failing and it isn’t “just” Amazon and the internet. There is a segment of society that is unsafe to be around. It’s not acceptable to talk about them, criticize them or otherwise suggest that they are a problem. 

They are violent, poorly educated and prone to committing crimes. I make it a point to stay as far away from these people as possible and I certainly wouldn’t voluntarily go to a place where hundreds of these losers were hanging out looking for trouble. 

American
1 month ago

One man’s dead mall is another man’s FEMA camp!

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