Shopping Malls Lose $4 Billion In Value After Reappraisals

Shopping malls, once a vital part of the American landscape and the backbone of the retail industry, have seen real estate values plummet an average of 60 percent in 2020, Bloomberg reported on Tuesday (Mar. 2).

Following reappraisals, some 118 retail mall properties lost $4 billion in value compared to 2019, according to Bloomberg data. The reappraisals were prompted by late payments, defaults or foreclosures. The decline represents the value drop since the mortgage debt originated, which could understate losses when it comes time to sell, since physical retail has been struggling for years. 

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

Some of the largest U.S. mall owners — including Simon Property Group, Brookfield Asset Management, Starwood Capital Group and Unibail-Rodamco-Westfield — have been evaluating which properties are worth saving. About 50 percent of the country’s 1,100 indoor malls have a decent chance of hanging on, Floris van Dijkum, a real estate analyst with Compass Point Research & Trading, told Bloomberg. 

Bond tranches were downgraded mostly on mall debt, Roy Chun, senior managing director at Kroll Bond Rating Agency, told the news outlet. “It’s the sixth or seventh inning of a game,” he said. “But you already know the winner and the loser.”

Some dead malls are coming back to life as corporate campuses, something Epic Games and Google are both considering. Epic announced its intention to purchase the Cary Towne Center near its North Carolina headquarters and create a new corporate campus on the 87-acre site.

While indoor malls have struggled, Tanger Factory Outlet Centers reported that its 36 shopping centers hit 90 percent of pre-pandemic traffic levels in the fourth quarter, and 99 percent for the month of January.

The country’s largest mall owner, Simon, said it is optimistic about 2021 because its eCommerce brands are performing well and physical malls are expected to rebound in some parts of Texas and Florida.