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What I wonder is why haven't the financiers clamped down on these failed businesses and why aren't these buildings going up on the auction block? Who is footing the bill here?
A lot of them are in receivership or bank-owned. But they're still being operated because that's less of a loss than closing them down. As for auction... who wants to buy a dead mall?
31972111]A lot of them are in receivership or bank-owned. But they're still being operated because that's less of a loss than closing them down. As for auction... who wants to buy a dead mall?
Too bad I wasn't in line for the free money. Because that's what it is.
There are areas of the country such as our area which is the largest cities in Montana. They are not closing down Malls, but are building them, due to the shortage of retail space. Our unemployment rate is 3.8%. In areas with low unemployment rate, the Malls are thriving. Where it is high, the Malls are closing.
Some Malls will be held while vacant, just waiting for the economy to turn around in the area and the need for retail develops.
Too bad I wasn't in line for the free money. Because that's what it is.
I'm not sure I understand this system
1) Borrow money
2) Build mall
3) Lease space to stores
4) Fail to make enough money from the leases to pay the service on the loans
5) Get mall foreclosed upon
6) ?????
7) Profit
1) Borrow money
2) Build mall
3) Lease space to stores
4) Fail to make enough money from the leases to pay the service on the loans
5) Get mall foreclosed upon
6) ?????
7) Profit
1) Borrow money
2) Build mall
3) Lease space to stores
4) Fail to make enough money from the leases to pay the service on the loans
5) Get mall foreclosed upon
6) 'Murica!
7) Profit
A commercial real estate developer owns two malls, A and B. If both are profitable, they get taxed on the total profit of A+B. If A is profitable and B is not, they get taxed based on the profits of A minus the deductible losses of B. Lower taxes='Murica!
One should point out that the people who financed and built the dead malls made out just fine. The people who bought them 2nd or 3rd hand are usually the losers in this game. The people who bought them at the fire sale are the ones enjoying the tax breaks.
A big part of the problem is that a lot of municipalities like commercial property because it's high revenue - low maintenance. They zone for too much of it with no regard to the regional context.
About 10 years ago I worked on a project in Burlington Co., NJ that was looking at the Route 130 corridor. This is an average, middle class, suburban county across the river from Philadelphia. The retail along the corridor is in sad shape and even as old strip malls crumble in one town, more are permitted and developed in the adjacent town.
Back then NJDOT and NJTransit were looking at redesigning the highway and possibly doing a BRT pilot project. The bus route is already a busy one and connects a couple of park & rides with Center City Philadelphia . . . but, the state wasn't interested in pushing anything on the county if people weren't interested so we did a series of charrettes up and down the corridor. The options were basically do nothing; do a little streetscaping - new lamp posts, plant some trees, etc; do the streetscaping + shoulder/bus only lanes; have a separate bus ROW off to the side of the highway; have one of those bus versions with some office and residential space built into the mix as sort of pad site development in the existing strip malls; or have one of those bus versions with the dead and dying strip malls turned into urban-ish villages.
In every charrette the majority opinion was streetscaping only. The online feedback we got was more in favor of enhanced bus service but no one was biting on redeveloping the malls as something else. We presented all of the data showing that the market was well beyond saturated and that you would need to lose x amount of retail space to get back to a healthy market or add x amount of sq. ft. of residential/office space to bring enough activity back to the area to get it healthy again. Since the entire area is zoned for strip commercial no one can do anything else with the land so it just sits there on the market, unwanted, dragging down all of the other commercial property around it. No one cared.
Everyone who had anything to say on it insisted that the design of the highway was the problem and that tweaking a few intersections would fix everything nevermind that there's an excess of 300k s/f of retail space and forget the fact that the highway design is ubiquitous in NJ and there's no correlation to dead malls there. Just plant some trees and everything will be fine.
1) Borrow money
2) Build mall
3) Lease space to stores
4) Fail to make enough money from the leases to pay the service on the loans
5) Get mall foreclosed upon
6) ?????
7) Profit
It's free money because you can bet your breeches the clowns that borrowed that money to build all those malls and stores, and quit paying off the loan...well, nothin's happened to them. Betcha 20 bucks they got their big box mansion with granite countertops and still living in them, driving that Lexus. Turns out, I know a couple personally. Not a dent in their lifestyle (hence it took some time for me to find out). You or I borrow a fraction of that sort of money and not make the payment... and the creditors will be on you like that. That's my point.
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