Share it
More retailers could end up in the coffers of their mall landlords if a bill introduced in the U.S. House of Representatives last month gains any traction. Proposed changes to the idiosyncratic rules governing publicly traded real estate investment trusts (REITs), which have bipartisan support, are being touted as good for retailers, though so far the backers are mostly landlords and their industry groups.
The spare text of the legislation belies how radically it would change REIT tax rules. Those are already complex and entail a host of limitations about their operations, though in return is a nice trade-off: REITs are also largely tax-exempt. If a REIT runs afoul of the rules, it falls out of REIT status, and may be liable for a hefty corporate income tax bill.
Share it
In the past several months, continuing a practice begun with the 2016 acquisition of teen apparel retailer Aeropostale, Simon Property Group acquired a slew of retailers. In a way, bankruptcy courts last year served as shopping centers of a sort themselves. Simon, in partnership with licensing and brand management firm Authentic Brands Group (via their 50/50 joint venture, Sparc), bought Lucky Brand and Brooks Brothers; earlier in the year, with rival Brookfield, they bought Forever 21. At the end of the year, Brookfield and Simon snapped up J.C. Penney for a cash payment of $692 million and new term debt.
It s unusual, but there are reasons why a landlord might want to own its tenant, or even many tenants. Speaking to analysts last year, Simon Property CEO David Simon cited the most fundamental of all to make money while minimizing the risk by calling it a sideline business.
The recent problems plaguing shopping malls nationwide, which began well before the pandemic shutdown, have been well-documented. One local example is Burnsville Center, the 43-year old shopping complex that went into foreclosure earlier this year. CBL Properties’ 522,000-square-foot portion of the mall was recently sold at an auction for $17.96 million.
Plagued by failing anchor stores, the owners of malls nationwide have been trying various strategies to replace the revenue previously earned from large tenants. Some strategies have worked better than others, and the long term fate of many malls is still in doubt, according to experts.
Fewer than half of the 1,500 enclosed malls built from 1956 to 2005 survive today, according to the real-estate research website Real Daily.