Making money by betting on dying malls

Some are hoping to make a lot of money with the decline of shopping malls:

It’s no secret many mall complexes have been struggling for years as Americans do more of their shopping online. But now, they’re catching the eye of hedge-fund types who think some may soon buckle under their debts, much the way many homeowners did nearly a decade ago.

Like the run-up to the housing debacle, a small but growing group of firms are positioning to profit from a collapse that could spur a wave of defaults. Their target: securities backed not by subprime mortgages, but by loans taken out by beleaguered mall and shopping center operators. With bad news piling up for anchor chains like Macy’s and J.C. Penney, bearish bets against commercial mortgage-backed securities are growing…

Many of the malls are anchored by the same struggling tenants, like Sears, J.C. Penney and Macy’s, and large-scale closures could be “disastrous” for the mortgage-backed securities. In the worst-case scenario, the BBB- tranche could incur losses of as much as 50 percent, while the BB portion might lose 70 percent.

I’d love to see some analysis of whether this is a good development: it doesn’t sound like this will break the mortgage industry in the same way as the subprime mortgage crisis, clearly some investors have learned something from the past, yet the default of shopping malls can have a big effect on the local economy and community.

There is an interesting summary of the fate of the American shopping mall in the final paragraph of the article:

“When a mall starts to falter, the end result is typically binary in nature,” said Matt Tortorello, a senior analyst at Kroll Bond Rating Agency. “It’s either the mall is going to survive or it’s going take a substantial loss.”

This can’t be good in the short term, particularly if the retail money vanishes into the Internet ether. In the long run, it does hint at a very bifurcated retail experience in coming decades: wealthier places where shopping malls still thrive and are popular and other places where there is nothing but big box stores, the occasional strip mall, and online shopping.

Creative writing at the suburban shopping mall

The Mall of America is offering a unique opportunity:

The Mall of America is taking applications for a summer writing residency, which makes now a good time to question whether our collective taste for absurd mash-ups has gone too far. Is this an attempt to out-quirk the Amtrak residency, where writers typed on trains? What’s next — a sculptors’ retreat in a Chevron station? A poetry workshop at Ikea?

Maybe, but think about it: The people-watching alone would make easy fodder. Look — there goes a man in a plaid shirt, walking past Foot Locker into Sephora. He emerges with a small bag. The story practically writes itself.

Submit your residency application by Friday, and you could be selected to commemorate the shopping destination’s 25th birthday by spending five days writing while “deeply immersed in the Mall atmosphere.” (Nights are spent in a hotel, not sleeping on a department store mattress as I’d hoped.)

I agree: the shopping mall could be part of all sorts of interesting stories. But, I do wonder how many of them would be positive in the hands of today’s writers. Too often, stories of suburban life follow a similar script: happy looking family or couple ends up spiraling downward as the facade falls away from their American Dream. Such scripts could involve the postwar suburban tract home, current McMansions, or the shopping mall, perhaps the symbol of suburban affluence, consumerism, and emptiness. What is the shopping mall but the poor facsimile of authentic Main Streets?

Maybe this would be an even more challenging task: do such a residency and craft a range of stories representing the experiecnes of all those mall visitors and employees.

Avoid public wi-fi

Here is a helpful reminder:

And finally, don’t forget for one minute that public Wi-Fi is dangerous.

This one illustration is humorous:

Evan, now 11, programmed fake Wi-Fi portals and took them to food courts shopping centers across the Austin, Texas, area and waited to see how many agreed to some pretty outrageous conditions. For the love of free internet access, they’d have to give their OK for the Wi-Fi owner to do things like “reading and responding to your emails, monitoring of input and/or output, and ‘bricking’ of your device.”

More than half of the shoppers shown these terms accepted them.

I like that this the article ties this issue to shopping malls. This might primarily be due to this time of year when plenty of people are out purchasing gifts. However, it also works because shopping malls are about as close as we get as Americans to public spaces. Where else can you regularly go for a safe environment to be around other people to do one of the ultimate American activities (consume)? While this article reminds us that the mall may not be so safe, is it odd that Americans tend to think of it as a safe place? And if malls want to keep attracting people (who then spend money), shouldn’t they do something about protecting their wi-fi?

I see an opportunity for either malls or security firms: ensuring that your public wi-fi experience is a good one.

The suburban mall of today is an entertainment center

Stores alone are not enough to attract people to malls; they are now full of additional entertainment options including restaurants and movie theaters.

“The traditional mall with four department stores as their primary traffic driver is no longer the best model,” said Joe Parrott, a senior vice president with the Chicago offices of CBRE, a commercial real estate company…

“A lot of these big entertainment players are coming,” Parrott said. “And the malls are interested in bringing tenants that are more experiential and broaden the appeal of the mall beyond just department stores.”…

Stratford Square Mall in Bloomingdale is a perfect example of the changing dynamic. The mall is launching a multimillion-dollar renovation and tenant improvement project that features both interior and exterior improvements at the 1.3 million-square-foot center. It’s a continuation of an earlier renovation that included the 2014 opening of Round One, a 40,000-square-foot entertainment center that features bowling, billiards, numerous video games and karaoke…

Experts with California-based Green Street Advisors have predicted that 15 percent of malls nationwide will close or be repurposed over the next decade. But that doesn’t apply to successful malls listed in the “A” and “B” category.

On one hand, the major changes in retail – big box stores, online shopping – mean malls have to adjust as do a lack of public spaces in many suburbs – which can be approximated by private entertainment spaces at the mall.

One expert cited in this article says, “Bad malls disappear.” Within the next decade or two, we might expect to see fewer shopping areas in the suburbs overall but the ones that do survive becoming behemoths. This could have some interesting consequences for communities that are home to these entertainment complexes as well as for those who lost out on the chance to have a mall decades ago.

How many suburban entertainment centers can one region have?

Schaumburg is looking into creating a new entertainment district out of underused properties:

Schaumburg trustees Tuesday approved a $6.58 million offer to buy the two single-story office buildings just north of the village’s convention center and Renaissance Hotel to help develop a new entertainment district and reconfigure Thoreau Drive.

The 110,000-square-foot Woodfield Green Executive Centre lies on the north side of Thoreau Drive and just across Meacham Road from Zurich North America’s new headquarters…

The long-term plan is to hold the property to sell to one or more developers interested in building more restaurant and other entertainment venues near the southeast corner of Meacham and Algonquin roads.

This sounds like a typical suburban strategy today: take properties that are not doing well or even abandoned (see efforts to utilize closed grocery stores) and start generating revenues through new entertainment use. Stores come and go but theaters and restaurants can come together to create a vibrant distract that will generate property and sales tax revenues for years to come.

This did lead me to a question: within the Chicago metropolitan region, how many entertainment districts can the region support? If many suburbs are trying to pursue these goals, can most of them sustain successful districts? There are already a number of successful or established districts: Evanston, Arlington Heights, Schaumburg and Woodfield, Rosemont, Gurnee Mills, the Oak Brook-Yorktown corridor, Naperville, plenty of other downtowns with lively scenes and regular festivals and events (Geneva, Aurora, Elmhurst, etc.) and countless shopping centers that are transitioning to lifestyle centers. I assume there is a saturation point where these districts start losing people to each other. Of course, this might be mitigated by two factors: (1) continued population growth so that everyone can share from a growing spending pie and (2) specialization among entertainment districts that could help each remain competitive.

Another thought: how often do entertainment districts simply reproduce existing patterns of wealth and the distribution of higher-end commercial properties?

Watching the planes in style at SeaTac

After walking through security at SeaTac, I entered the central food court and shopping area. I was greeted with this view:

IMG_20160823_155444200

From this gallery, you can watch the main runways as planes takeoff and land and you can do so seated in wooden rocking chairs (close to the windows). I assume many airports are designed with providing sufficient gates and access to planes in mind. Think of O’Hare or Atlanta where the concourses are long. Yet, this view took the mall court airport plan – common across many newer airports including ones I’ve seen in Tampa, Orlando, and Las Vegas – to another level: providing a large view of the most interesting work of the airport as planes travel at high speed.

An overview of the airport feature from when it opened in 2005:

The feature attraction, however, is the 60-by-350-foot glass wall that overlooks the runways and, in amenable weather, the Olympic Mountains. It’s more than just a big picture window. The panes are wrenched into a compound curve, convex in the vertical plane and concave in the horizontal. It looks more like a portal to a space warp than a mere window. The web of steel cables, struts and attachment spiders that allow the curtain wall to flex up to 11 inches in a worst-case windstorm or earthquake is all exposed to view, a celebration of virtuoso building technology…

Architect Curtis Fentress, the terminal’s principal designer, is convinced that people want to feel the excitement of travel again, and that it touches a deeper place than momentarily marveling at the apparent miracle of 400-ton cigars storming into the sky. He recalls a boyhood visit to the airport to see his uncle off to the Korean War. “We watched him wave to us from the plane,” Fentress recalls — an impression half a century old, burned indelibly into his mind.

Bonus: this area seemed to particularly fascinate small children. This is no small feat in the harried realm of traveling.

Deadmalls.com

The site has not been updated for a year or so but there is a lot of interesting retail information at Deadmalls.com. You can even purchase your own memorabilia (though I was hoping for something more ghastly)!

Four quick thoughts:

  1. The shopping mall was a marvel of the post-World War II suburban era. Today, there are still thriving malls – even in urban locations as they figured out that they needed to play in this game – but plenty of dead ones (27 listed in Illinois alone). The wonder of having all of those stores in one location that is easy to reach by car.
  2. Have the shopping malls been replaced by anything? Shopping online is not the same visceral experience. Perhaps it is big box stores: occasionally when I wander into a Home Depot or Costco or Walmart, I am astounded by the vast size, the number of products, and the relatively low prices.
  3. There are a lot of efforts to renovate or revitalize shopping malls including turning them into lifestyle centers, adding housing, and incorporating new features like skating rinks. Such efforts will probably succeed in a number of malls..
  4. I’m reminded of the portrayal of a dead mall in the book Gone Girl which portrayed it as a suburban wasteland (along with the McMansions). It would be worthwhile to go back to these dead malls sites in a decade or two to see what has become of them. Urban/suburban ruins? New uses?