CCIM Washington State Chapter’s Post

The mall redevelopment struggle is real. Brookfield spent billions in 2018 with a plan to transform 125 malls into mini-cities with residences, offices, hotels, and stores. Fast forward six years (and one pandemic), and only two malls have been redeveloped, with two more in the pipeline. The challenges are huge: prolonged government approval processes, community pushback, long-term tenants with veto power, and skyrocketing construction costs. No wonder Brookfield has decided to focus on their top 20 properties (mirroring a common 'top vs. lower tier' CRE trend), having sold or returned 24 malls to lenders with plans to sell up to 16 more. #CommercialRealEstate #MallRedevelopment #RetailToMixedUse https://lnkd.in/gVf3H9jR

IMO what would truly be ideal is if some big-hearted, billionaire philanthropists, like Melinda Gates and Warren Buffett, could join together and turn these deserted malls and ghost town shopping centers that are plaguing every city across the country into shelters for our nation's unhoused vets, citizens, and newly immigrated asylum seekers and their families instead of ignoring our vets and citizens in need, or bussing and dropping immigrants off in overpopulated cities to fend for themselves and to be used as political ammo. If the stores could be temporarily filled with bed cots for everyone to lay their heads, safe from the outside elements, then the new tenants could spend their days looking for work to better themselves and their families, etc. Also, while these people are being housed, they can put their skills to use by doing things like remodeling the insides, maybe turning some of the old, huge department stores into college-like dorm rooms with bunk beds and such, and the smaller stores into classrooms, where the English speakers could be teaching English classes, vets could be teaching US History to ready the asylum seekers to eventually become better citizens, immigrants of different cultures can be teaching each other occupational skills like cooking in the food courts, plumbing, and electrical to keep the facilities running in tip top shape. The gov't could offer mall owners and retail shops with lease contracts some tax breaks and incentives to participate in this program, making it beneficial all the way around. Furthermore, to cut through all of the red tape, just as the Defense Production Act was used to assist in fighting the issues of resource scarcity during COVID-19, can't it be reformulated to apply in some way or can something similar be created to apply to what should be considered as a national emergency of the unhoused and immigration? Now, I'm sure I'm being naive and that I'll get a lot of backlash regarding this idea, but as an Integrated Studies major at FGCU, I've been taught to think from multiple disciplines to solve complex issues--I believe from psychological & sociological standpoints this would give the recipients a sense of purpose bettering their mental space, while immensely helping to solve a lot of the national crises of homelessness and immigration, and from an environmental sustainability standpoint, this would be less taxing on the environment, our wildlife, and our planet as a whole because we would be using buildings already here rather than using entirely new construction. I'm sure many will find my post silly and stupid, maybe even ignorant but as I've said, this is in my opinion and in an ideal world, this should be a great solution. I just have a bleeding heart for human suffering and would rather these projects be not-for-profits. I sincerely believe such programs would turn the recipients into assets to our country, rather than the burdens on society that so many people claim them to be.

I spent weeks reporting on real-estate giant Brookfield's slow progress in adding apartments, offices and hotels to its enclosed-mall portfolio. It might seem like a no-brainer to add other types of real estate to malls' increasingly empty parking lots, but these redevelopments aren't easy to get off the ground for several reasons: -Building apartments or offices on mall properties often requires rezoning, meaning mall owners need to win over local officials and residents -Many department stores have longstanding contractual agreements that allow them to block non-retail development on mall properties. So mall owners often need to convince - or pay - department stores to allow the project -Construction costs and interest rates skyrocketed after the pandemic hit, making some previously attractive projects unaffordable today Has a regional mall near you been redeveloped to add non-retail real estate? If so, what did the mall owner build and do you think it's been successful? https://lnkd.in/e6mCwGbC

Affordable residential space and empty malls with low foot traffic are two issues that America is currently grappling with. One would think there would be a way to mitigate both problems with one solution - convert mall space into residential mini-cities. The Wall Street Journal reports today, that’s easier said than done. Brookfield’s plan to turn mall space into mini-cities is taking longer than expected. Brookfield Property Partners spent billions in 2018 to assume full ownership of mall-owner GGP when malls were out of favor on Wall Street. Executives had said back then that they would turn most of the company’s 125 malls into minicities with residences, offices or hotels as well as stores. Six years later, only two malls, in Atlanta and near Seattle, have been redeveloped in this way, with another two—in North Carolina and Denver—in the pipeline. That’s a bit unfortunate considering how many malls have seen their value drop since COVID while many people are struggling to purchase affordable residential spaces. I am not certain if Brookfield had conducted any pilot studies of what it takes to actually convert a mall into a residential mini-city - but this particular example shows how even seemingly obvious and helpful ideas can struggle to gain traction when faced with the reality on the ground. It is always best practice to test out a strategy on a pilot scale and use the learnings from such a pilot before scaling things up. (PDCA cycle anyone?). #future #strategy #execution #growth #PDCA #demming

The most interesting article I read this past week was this retail industry The Wall Street Journal article on Brookfield’s big bet to redevelop their mall portfolio across the country. It was also discussed at length during by Lonnie Hendry, CRE, Hayley Keen and Stephen Buschbom during the always fantastic Trepp, Inc. podcst that I listened to over the weekend. As the Trepp team noted, while these projects may not have come together as quick as had been initially hoped, it seems a bit too soon to say this plan falls short as there is a really good play here and it is one that others have proven, it just takes time. As a CRE lawyer, we unfortunately know all about that because in addition to government approvals, parties need to work with lenders, tenants, ultimate end users/operators and oftentimes adjacent property owners to make these types of redevelopments come together. Our Frost Brown Todd team has done this type of work for all such stakeholders and it isn’t easy. Our zoning lawyers like Tanner Nichols have worked on these for large shopping center clients. My Partner Christina Sprecher has done this work for some large national tenants and discussed the challenges that shopping center CC&Rs and REAs create for these redevelopments at the ICSC National Law Conference just last year. I have had the chance to work with both lenders and adjacent property owners in doing this type of work. There are simply so many parties that have to sign off on these types of projects that it takes time, grit and a focused project management mentality to consistently stay on track with goals and objectives in a manner that isn’t easy and unfortunately is almost always more costly than originally anticipated because of the amount of time involved. The reality though is that the outcomes can be both truly transformational, like what we have seen recently in Louisville with Topgolf starting what has become a true game changer for the Oxmoor Mall, but also a meaningful improvement with a Hilton Garden Inn changing the dynamic of the Mall St. Matthews. #LFGMonday #CRE #Retail #redevelopment #letsgetfrosty

Redevelopment is not easy having to deal with cities, tenants, and capital markets. I do expect the mall redevelopment trend to continue as most are on large land parcels in urban settings. #redevlopment #landforsale #infill #malls

Converting enclosed malls into vibrant mixed-use properties takes a long, long, long time. The process is complex and approvals of all kinds cause delays. In this decade alone, the Covid-19 pandemic, followed by rising construction costs, high interest rates, plummeting asset valuations, department store closures, specialty retailers migrating to suburban open-air centers, etc., have delayed and, in some cases, scuttled these very pricey redevelopments. Since 2018, when Brookfield Properties assumed full ownership of mall-owner GGP planning to turn most of the 125 malls into mini cities, the company has already sold or handed back to lenders 24 malls, and the firm is looking to sell up to 16 more. But, these problems are not limited to Brookfield. Headwinds involving the massive redevelopment of malls into mixed-use projects is something that other top real estate companies owning U.S. enclosed malls face including Simon Property Group, Unibail-Rodamco-Westfield, Macerich and others.

In 2018, Brookfield Property Partners made a bold move by acquiring full ownership of mall-owner GGP for billions of dollars, betting on transforming the 125 malls into mixed-use developments with residences, offices, hotels, and stores. Six years on, only two malls, in Atlanta and near Seattle, have been redeveloped, with another two projects in North Carolina and Denver in progress. This slow pace emphasizes the challenges and high costs of revamping enclosed malls. Approvals from cities and towns are often lengthy and contentious, compounded by long-term contracts with other mall tenants, particularly department stores, that can block nonretail development. Vince Tibone of Green Street highlighted the complexity of these large projects. Brookfield executives maintain their long-term vision, having redeveloped over 40 former department stores since 2018, yet the pandemic, rising construction costs, and interest rates have caused delays. Despite the hurdles, Brookfield continues to move forward with projects that make financial sense. CEO Brian Kingston acknowledged the need to revisit plans due to changing economic conditions. Shifting consumer habits and the rise of online shopping have hit malls hard, although top-tier malls remain popular. However, lower-tier malls have seen significant declines in value and tenant occupancy. Brookfield initially acquired a 34% stake in GGP in 2010 and bought the rest in 2018 for $9.25 billion. While some properties, like Grand Canal Shoppes in Las Vegas and Ala Moana Center in Honolulu, are thriving, many lower-tier malls have struggled. Brookfield has scaled back its redevelopment plans and sold or handed back 24 malls, with 16 more potentially on the market. The focus has shifted to the top 20 malls, with investments aimed at maximizing capital returns. Brookfield has faced challenges with its long-planned apartment projects, such as in San Francisco, where it is close to securing approvals for a 3,500-unit development at Stonestown Galleria. Despite delays, new California laws have facilitated the approval process. CEO Kevin McCrain emphasized Brookfield's commitment to refining its debt at properties like Oglethorpe Mall in Savannah, despite significant valuation drops. Brookfield's journey reflects the broader struggles and adaptations within the retail sector, as it navigates the complexities of transforming traditional malls into diversified, resilient properties. #RealEstate #Brookfield #RetailTransformation #Malls #MixedUseDevelopment #UrbanPlanning #PandemicImpact #CommercialRealEstate #ShiftingMarkets #RealEstateInvestment https://lnkd.in/eE2B_kEF

This prominently positioned local center has undergone recent renovations and enhancements. It offers a second-floor office area situated in the vibrant South Tampa district, known for its dense population and prominent visibility at a bustling intersection in Tampa. Retail and office spaces are currently available within this inline setting. Contact me if you have any questions or need pricing for any assets in your portfolio. Bobby Gross (813) 387-4776. Investment highlights: • Short Term Leases with Auto Renewals and 3-7% Annual Rental Increases. • Weighted Average Rent is $21.46/SF | Submarket Average Rents are $31/SF. • 6 Retail Suites on 1st Floor (7,613-SF) | 20 Office Suites on 2nd Floor (6,107-SF) • 55.49% of Total GLA Consisting of 1st Floor is on NNN Leases | Upstairs Office is all Gross  • Proximity to Major Arteries & Downtown Tampa | South Tampa is a High Barrier to Entry Submarket | High Intrinsic Value and Limited Supply • Proximity to MacDill Air Force Base | 20,000+ Stationed and $4.98B Economic Impact • Excellent Demographics | 156,000+ Residents within 5 Miles with AHHI in Excess of $121,000 OM Link: https://lnkd.in/eTHh_zkS  

Recent headlines about the proposed changes for Westshore Plaza in Tampa reflect a larger shift in retail real estate. As consumer trends evolve, mall closures are creating new opportunities in mixed-use developments and beyond. Hear from Heather List on how these trends are reshaping the market in our latest blog: https://lnkd.in/e2t2UF9m #westshoreplaza #mallredevelopment #commercialrealestate