"The mall sector is an interesting space, and is not without challenges; however, the challenges are oversold."


Dave Monahan Retail Capital Markets Managing Director, JLL


returns relative to the true risk they are taking on. I am confident certain investors are going to make exceptional returns in the mall space, but it is going to take a high level of conviction and a long-term perspective.” He continues, “I was selling a mall in Texas a few years ago and during the purchaser interviews our client (seller) asked “What’s your hold period?” The group who ultimately purchased the center had the perfect response “I have no idea. I am happy to hold it for five years. I’m happy to hold it for 20 years. I’ll exit when the market tells me I can exit.” That’s the best perspective any regional mall can have in the current environment. As an investor you must be flexible in your hold period. Understand that reinvestment in your assets are key. Be prepared to invest at level that’s necessary to drive NOI and leasing – it’s expensive. What we’ve seen from a Capital Markets perspective is the mall sector has historically fluctuated between high and low liquidity and right now, we are in a very low liquidity period.”


Desperate times don’t call for desperate measures. Instead, challenging times calls for progressive measures to produce valued outcomes. Malls are finally evolving, and owners are adapting to changing consumer needs by finding the highest and best use for their retail real estate assets. David’s outlook can be summed up best with, “Certainly, challenges remain for the mall’s continued evolution, but malls are generally well positioned, with limited supply and strong demand for high- quality space.”


David’s first mall deal was in 1999. A small - less than 10 percent interest in Water Tower Place in Chicago, IL that his group sold on behalf of Heitman. It was his first dive into a mall transaction where he learned a lot and describes the experience as “baptism by fire”.


and that’s a win.”


With the victories and defeats malls have experienced, one top- of-mind question is how are mall owners viewing their assets? And simply, it depends on the asset. “If you look across the real estate investment trusts (REIT) platform, Tier I REITs have exceptional and productive assets. For those with a portfolio of 100+ regional malls, you will cover the quality spectrum of assets. Mall owners are happy to reinvest in and/or redevelop their top performing assets to continue their progress. The biggest challenge then becomes, what’s the appropriate level of reinvestment given where values are today. Owners with a long- term view of ownership will do what’s right for the center. As the view of ownership shortens, it becomes a challenge to figure out the appropriate level of reinvestment.”


According to David, “Negative headlines claiming the mall is dying are rampant are not 100% accurate. From a pure investment perspective, many investors are seeking outsized


David's largest and most favorite deal-to-date was the selling of The Shops at Crystals, an ultra-high-end luxury center, in Las Vegas, NV in 2016. He recounts it as an unbelievable billion + dollar deal completed with Capital Markets Managing Director, Michael Zietsman. “By far the most impressive retail center that I have sold in my career.”


David Monahan Managing Director Retail Capital Markets david.monahan@am.jll.com


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