NEW YORK — Mall owners may have one of the toughest jobs on the planet with the implosion in retail, but three top executives whose job it is to fill them with viable tenants contend that the doom and gloom is exaggerated.
“There’s no retail apocalypse,” said Stephen D. Lebovitz of CBL, which is headquartered in Chattanooga, Tenn., with properties mostly in suburban markets, at a panel last Thursday night in New York on the state of his industry. “We’re still viable. We’re not going away. Ninety-one percent of retail sales are still from stores. You’re stuck with us.”
Seated next to him was Joseph Coradino, chief executive officer of Pennsylvania Real Estate Investment Trust (PREIT), which is redeveloping the former Gallery at Market East into a sprawling shopping, dining, and entertainment complex called Fashion District Philadelphia with fellow mall developer Macerich.
“All the negative rhetoric out there is way overblown,” Coradino said. “Probably, a healthy number of malls need to have adaptive reuses and not be malls.”
Instead of facing extinction, the executives say they are being forced to be more creative in filling their malls and shopping centers with the right mix of tenants, renegotiating co-tenancy provisions in leases as department stores crater and leave adjacent retailers in a pinch, and invest in new technology as millennials surpass aging baby boomers to set the retail agenda.
“There is no question that there are good malls and bad malls,” Coradino said. “PREIT addressed the bad malls by selling off 17 of them, and what we have left, there is robust demand for.
“There are 6,000 bankruptcy closings in this country, on average one per mall, and we have 70 percent of that covered already after closing department-store spaces, or taking back department stores in five instances,” Coradino said. “We have nine of them with fully executed leases, and the remaining four are in the process. We will have six new anchors this year, five next year, and two in 2019.”
Coradino said he hoped to announce a new tenant for the former J.C. Penney space at Willow Grove Park Mall before his November earnings call and was flying out to Texas to meet with the new tenant.
The panel was hosted by the real estate services firm JLL in its Manhattan office with an audience of about a dozen reporters who cover the retail industry or retail real estate.
Rounding out the panel was Greg Maloney, president and CEO of the Americas retail group for JLL, which owns about 110 malls totaling 100 million square feet of retail. He said it was crucial for both mall owners and retailers to embrace the new technology that’s able to gather more data than ever on consumers.
“The consumer has changed. Ecommerce has really made retailers take a look at how they can get that product to the consumer’s hands quicker and more efficiently,” said Maloney.
The executives said they were receiving more help from cities and municipalities to keep their malls thriving or to develop new concepts, such as Fashion District Philadelphia.
“For us, we’re pretty excited about the role of Philadelphia with our joint venture with Macerich,” Coradino said. “We got about $140 million in public financing. The city knew early on it had to be involved with this project.”
Lebovitz said his family started CBL in 1978, and it went public in 1993. The company now has 141 properties — of which 65 are malls or open-air centers — that total about 70 million square feet of retail and generate $1 billion a year in revenue. He said cities such as Kansas City, St. Louis, and Milwaukee have been aggressive in providing financing.or allowing rezoning on recent projects.
“We’ve seen this willingness by cities and counties to work with us, and it’s accelerated the last few years to be proactive in working with us,” he said.
On the evolution taking place, “this is work, and we have to work to stay ahead of it. We were very fortunate that we moved quickly and sold assets beginning five years ago, and now we put ourselves in a position where we can respond to whatever happens at a very high velocity,” Coradino said. “It’s a little bit like detox — there is a period of cleansing and you come out of it stronger and healthier.
“Our industry is going through a detoxing,” he said. “It will take a while to prove it, but in the end we will come out of this stronger.”