More Bad News For General Growth Properties and The Elk Grove Promenade: "The Market For Malls is Dead"

Malls selling for prices far below normal market value; General Growth Properties attempted sales of malls to refinance debt could be like betting on a nag in the Kentucky Derby


"The market for malls is dead."

So says Dan Fasulo, managing director of research for Real Capital Analytics, a New York-based real-estate-research firm.

Fasulo's comments are from a Wall Street Journal story titled Maul Market: Cincinnati Mall Sells on the Cheap.

The story details how a mall in Ohio, 1.4 million-square-foot Cincinnati Mills recently sold for less than $20 a sq. ft. Typically malls sell at an average national rate of $134 sq. ft.

Regular readers of this site will note that Chicago-based General Growth Properties (GGP), developer of the unfinished Elk Grove Promenade, has put several of it's high-profile malls on the market in hopes of using the proceeds to pay down a multi-billion dollar debt.

The Cincinnati mall, which has been open for 20 years, has always played second fiddle to two more prominent area malls which has led to low occupancy. The story notes:

From its earliest days, Cincinnati Mills has had difficulty competing with two other larger malls nearby, says Jeffrey Johnston, senior sales vice president with commercial real-estate advisory firm Grubb & Ellis/West Shell Commercial in Cincinnati. It also got off on the wrong foot with an early failed concept that tried to bring higher-end retailers into a largely blue-collar area, Mr. Johnston says.

Substitute Cincinnati Mills with Elk Grove Promenade and think of Arden Mall and the Roseville Galleria and you can look into the future and see what might become of Elk Grove's "mall."

With the price of malls being mauled, the possibility of GGP selling it's prime properties and paying down it's multi-billion dollar debt is as likely as the aforementioned nag winning the Kentucky Derby. With credit still tight, GGP's options are at best limited.

So what will become of The Elk Grove Promenade?

Perhaps it will follow the course being laid out by the new owners of the Cincinnati Mills. The story notes:

. . . is planning a name change and would like to bring in more traditional retailers as well as some non-traditional mall tenants to fill empty spaces, such as entrepreneurs, as well as doctors that bring needed foot traffic or dialysis centers. "We have to be very innovative because we've tackled a big old white elephant and it takes a lot to keep it going," Mr. Robinson said.

We're not sure what "non traditional" mall tenants refers to, but it is obvious it doesn't mean Sears much less Macy's. As Fasulo noted in the story, "These properties are very capital intensive and without the debt markets it's impossible to make them work."

Good luck finishing this project, GGP!