Investing in Distressed Mall Properties Addressed at NRC EventLarry Feldman, president and CEO of NY-based Feldman Equities, discussed investing in distressed mall properties and turnaround strategies for underperforming properties at the May luncheon meeting of the National Realty Club held at the Williams Club in Manhattan.
The mall landscape is littered with the names of once great department stores that have succumbed to bankruptcy or are in the middle of down-sizing in an effort to keep afloat. Many malls have suffered substantially as Wal-Mart and Target continue to roll out their superstores. There are approximately 1,200 enclosed retail malls in America and a rough estimate is that one fourth of these malls are in trouble, at least to some degree. Some malls are witnessing eroding market share while others are experiencing massive vacancies and foreclosure.
Feldman Equities has been very successful with a strategy of investing in distressed enclosed retail malls, which most real estate investors have avoided mall turnaround plays for a variety of reasons, ranging from the fear of retail bankruptcies to the Wal-Mart juggernaut theory.
Typical candidates for the Feldman turnaround strategy are enclosed malls of 500,000 square feet and above that require gross investments (including debt, equity and upgrade costs) ranging from $25 million to $150 million. In almost all cases, the total costs of acquisition and renovation result in a total redevelopment cost well below replacement cost.
Distressed malls can be acquired and renovated at far below replacement cost, and these malls are often in very good locations. We approach each mall situation by coming up with a comprehensive strategic turnaround plan. The strategic plan almost always involves devising a strategy of "Wal-Mart proofing" the mall through an aggressive leasing campaign. The number one objective of the leasing campaign is to seek out new anchors and specialty retailers that don’t compete with Wal-Mart or the typical power center down the block.
The Feldman strategy involves attracting the right mix of specialty retailers which offer specialized products, not available at Wal-Mart. The strategy also combines these specialty retailers with an entertainment anchor such as a multiplex theater and a series of upscale restaurants.
About Larry Feldman
Larry Feldman is known for his depth of experience in all facets of real estate, including development, construction, leasing, management & finance. He is well known in the real estate industry for his proven track record of turning around underperforming property through extensive renovation, aggressive promotion and lease-up.
Larry Feldman has been the president and CEO of Feldman Equities, Inc. since 1990. Larry and his father Edward Feldman formed Feldman Equities in 1985. Feldman Equities traces its roots to a continuing family owned real estate company that was founded by Larry Feldman’s grandfather, "HJ" Feldman, in 1920.
During the mid 1980's, Larry Feldman was primarily a developer/builder. During this period, he developed several major properties in the metropolitan New York area, including a 40 story office tower in Manhattan known as Tower 45. Over the last 15 years, Larry Feldman and his father Ed developed or acquired over 10 Million sq. ft. of office & retail properties with an aggregate value in excess of two billion dollars.
