MALLS KEEPING OPTIONS OPEN AS THEY SEARCH FOR TENANTS
As two major U. S. mall companies filed for bankruptcy entering November, the owner of Danbury Fair pushed off to next spring a $ 191 million mortgage secured by the mall.
The CEO of Macerich emphasized to analysts this week that the company had the luxury of doing so due on the strength of its balance sheet. But with the balance of the 2020 shopping season still ahead, malls remain in a precarious position as the COVID- 19 pandemic accelerates anew.
CBL & Associates declared bankruptcy this past week, with the company the seventh largest owner of malls and shopping centers in the country in 2018 as ranked by National Real Estate Investor. Also filing for bankruptcy Pennsylvania Real Estate Investment Trust, ranked 30th that year.
Days before, the nation’s two largest mall owners Simon Property Group and Brookfield Asset Management finalized an agreement to rescue J. C. Penney from bankruptcy, saving most stores.
And last month, retailer Safavieh Home Furnishings spent more than $ 20 million to acquire the Stamford Town Center mall, the price equating to just one fifth of the mall’s appraised value as assigned last year by the city of Stamford.
In a study published in October, Barclays Capital determined that 28 percent of U. S. malls had a vacancy rate of at least 20 percent as of September, the “danger zone” in the words of the report threatening the financial viability of a mall. That compared with just 8 percent of U. S. malls being in that bracket heading into the fall of 2019.
The owners of both the Connecticut Post Mall in Milford and Westfield Trumbull have proposed building apartments to diversify their sources of revenue. And Westfield Trumbull is among those attempting other nontraditional mall draws with its SeaQuest interactive aquarium.
Macerich converted a former Sears store this past summer into a hospital clinic at a mall outside Albany, N. Y. And in September 2019, Norwalk
based Stew Leonard’s established a grocery store in a onetime Sears at aNew Jersey mall owned by Brookfield, weeks in advance of Brookfield opening The SoNo Collection mall.
‘ Really good space opening up’
Danbury Fair mall owner Macerich lost $ 22 million between July and September, while buying time on a $ 191 million mortgage coming due that is secured by Danbury Fair. Macerich now has until April to pay off the loan which carries a 5.56 percent interest rate, by far the highest of any other mall in the Macerich portfolio of more than 50 nationally.
Danbury Fair enters the 2020 holiday shopping season with about four of every five storefronts filled, including the spacious top level of a former Forever 21 store.
Dick’s Sporting Goods expanded recently into the space, giving Dick’s an interior gateway to the mall that its original layout lacked.
While a second major hole is being filled in the Danbury Fair lineup with the arrival next month of Barbarie’s Grill in space vacated last May by Brio Tuscan Grille, the mall has yet to state its plans for its Lord & Taylor anchor pad as the department store chain conducts clearance sales in a bankruptcy proceeding. Lord & Taylor is also shuttering its standalone department store in Stamford and mall stores at Westfield Trumbull and Westfarms in Farmington.
The pandemic mall closures brought leasing “to a screeching halt” across Macerich properties nationally, in the words of CEO Tom O’Hern who spoke with investment analysts Thursday on a conference call. But retailers have since adjusted, he added, and he anticipated new deals in the works next year.
“It’s interesting — our top 20 properties have normally been ... 95 percent, 96 percent leased; and now we see them 92 percent, 93 percent leased,” O’Hern said.
“With that said, really it’s the first time in years we have some real good space opening up in some of our top- tier centers. And that hasn’t happened in a while, and that’s really piqued the interest of some of these retailers that want to be opportunistic.”
Still, Danbury Fair has yet to reveal any takers for its former Safavieh mall store spanning two levels adjacent to Lord & Taylor; nor for the lower level of the former Sears store at the opposite end of the mall, with Primark having taken the top deck three years ago.
“There’s been a ton of focus on traffic and the fact traffic is down compared with last year — and it is, there’s no arguing that,” said Doug Healey, senior executive vice president of leasing for Macerich. “However, I struggle with the notion that traffic seems to be perceived as the sole means to a retailer’s success. Why aren’t we talking more about conversion or sales or the combination of both? Despite less traffic, the Macerich portfolio is seeing tremendous success in the reopening of stores that were forced to close due to COVID, like Primark at Danbury being the No. 1 store in its region since reopening.”
As Barbarie’s Grill hires up for a Danbury Fair opening in early December, the SoNo Collection will be nearing the long- awaited activation of its West Avenue facade that greets motorists arriving from Interstate 95, with the opening of Yard House. The sports pub chain’s arrival comes more than a year after developer Brookfield Properties opened The SoNo Collection’s concourses with only a fraction of its full contingent of stores.
On Friday, the CEO of Brookfield Properties sold analysts “the worst of the economic shutdown is now behind us” — but with the company’s 2020 losses topping $ 2 billion heading into the final three months of the year. He added an “80- 20 rule” could come into play in Brookfield cedes control of a percentage of retail properties for which it is unable to reach agreements on refinancing.
“We are beginning to see sales that are not only approaching normalized levels, but over- performance in some markets,” said Brookfield Properties CEO Brian Kingston, during a conference call. “Many of the weaker balance sheets or more- challenged retailers, they have hit the wall and they have gone bankrupt ... I think what we are left with now is a much stronger field of tenants, with businesses that have largely stabilized.”