Many struggling shopping malls are trying to find salvation by going small—in their purchasers, sales prices and, in some cases, size.
As the nation's largest mall owners sell off or give up their most-troubled properties—dogged by deteriorating neighborhoods, newer rivals and online sales—smaller real-estate companies are snapping them up at discount prices and trying to find ways to pull them out their death spirals. Sometimes, that involves demolition.
It is a high-risk turnaround game that is gaining favor among local companies and small specialists that are gambling they know local markets well enough to succeed where the big guns failed.
According to Real Capital Analytics, 48 of the 201 U.S. malls that traded hands since early 2010 were sold out of "troubled" situations, most often involving delinquent mortgages. In most cases, the value of those properties fell so sharply that they were sold for much less than was owed on them. In the past year, malls with defaulted mortgages were sold at prices amounting to an average of 63% of their mortgage balances, according to Real Capital.
"These mall transactions show that investors now are interested in higher risk but potentially higher yielding retail investments in the U.S.," said Ben Carlos Thypin, Real Capital's director of market analysis.
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Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.
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