💼 /r MallStreetBets

briefcase | invest smarter | issue #9 | by brad cartier |

Mall Street vs Wall Street

And according to WallStreetBets...I quote:

"We can be retarded longer than they can stay solvent." — /r WallStreetBets

🤔 All caught up? This email isn't about GameStop though, this is about something much bigger. We're talking about a long-standing staple of the retail and real estate industry: Malls.

Malls? You may be thinking...I shop from home without pants 👖 like a normal person! But there's an important discussion here for real estate watchers 👀.

And, who doesn't love driving 🚘 around a mall parking lot on a Saturday afternoon?

Mall Street vs Wall Street
😡 GameStop isn't the only hated stock in town. Institutional short-sellers have also taken out large positions on mall owners (aka GameStop landlords).

Take for instance beleaguered mall owner Macerich Co., whose shares more than doubled 📈 last week as the Reddit crowd pilled in to squeeze wall street short-sellers...then came back down to reality.

This time last year the stock price sat at around $5, which at the time was a 92% drop from 2018. 😨 Ouch.

As Macerich's shares rose uncontrollably, the Ontario Teachers’ Pension Plan, which was the largest shareholder in the company, took the opportunity to dump all of its stock—15% of the company.

🏃🏻‍♀️🏃🏾‍♀️🏃🏾‍♂️🏃🏻‍♂️💰💨

Anyone here speak emoji?

As of last week, 85% of Macerich's shares were held by short-sellers 🤯. GameStop sat at 88%.

The same goes for Tanger Factory Outlet Centers Inc., which doubled last week before settling back down.

Still, the company has lost 72% of its stock value since 2016.

With 💉 vaccines ahead of us and the ongoing battle between the Reddit mob and Wall Street 🥊🥊, what does the future of the mall industry look like?

Well, grab a 🥨 for mid-mall snacking and let's talk commerce 🛒.

🤢 Retail in peace (the bad)

Me: We need to talk...

Mall: Everything ok?

Me: No...it's not. Without a deep disruption and pivot, your core business model and underlying real estate assets are about to be MySpaced.

Mall: 😰

Me: Stick around, there may be some good news.

😨 Malls are in a rough spot as eCommerce plus the pandemic have dealt a fatal blow to the traditional retail mall. According to CNN, mall vacancies as of September 2021 sat at almost 10%. And that's only going higher ☝🏻.

📊 There were more retail bankruptcies in 2020 than in 2019, but the closing of many retail operations will decrease rental rates and provide opportunities for new retailers and business concepts.

🚑 Saving malls (thinking out the box store)

There's hope! Wherever distress lurks there is an opportunity for introspection and new business models.

Barclay’s CMBS estimates that 15 to 17% of malls in the U.S. will need to be redeveloped for other purposes.

So, last night 🌙 Peter the Intern 🙋🏽‍♂️ alongside his trusty Mountain Dew and Cheetos, came up with the following ideas he found across the Internet (which I'm told is a series of tubes).

1. Pop up retail: 🏪 Allow short-term uses such as food trucks, seasonal retail, and small businesses to rent out less expensive and temporary space. This strategy brings lots of foot traffic and can help boost a local economy.

2. Warehousing and Distribution: 📢 HEY AMAZON OVER HERE! If there's one thing malls have, it's space, and lots of it (8.5 billion sq ft).

Become a part of the supply chain by repurposing mall spaces for eCommerce and retailer fulfillment and last-mile ordering.

Story Time 📖: Rolling Acres Mall, opened in 1975, with 140 stores and a food court. After being unable to pay its electricity bill in 2008, the power was shut off, and a foreclosure ensued. 🚧 Following a demolition in 2016, Amazon purchased the site for a new distribution center.

3. Residential: 🏢 Affordability and the supply of housing are at a critical impass in North America. There's not enough of it, and prices keep rising beyond wages and inflation.

There's a unique opportunity to repurpose the retail relics and trade in aggressive kiosk workers 😠 for long-term tenants 🥰.

👴🏾👵🏻 And, this proposition only becomes more interesting when applied to the senior warehousing dillema (but that's a story for another day).

4. Data Center: 👨🏽‍💻 With the rise in eCommerce and digital media, we need more data management and storage than even. This sector alone is expected to grow annually at 8.5% until 2026.

5. Incubator and Innovation: 💡 The layout of malls is already well suited for innovation hubs, incubators, and college campuses. In a time where innovation and education are in short supply, we need to create spaces that better enable these critical societal functions.

For instance, a 70,000 square foot shuttered Sears in Idaho Falls is being repurposed to be a charter school. Well played 👏🏼👏🏼👏🏼.

6. Health Hub: Bring all of the health requirements under one roof: 👩🏽‍⚕️👨🏽‍⚕️🩺🏥💉🦷. These spaces can include recreation and research facilities as well.

7. Entertainment Centers: Watch this. According to Curbed:

Faced with the challenges of drawing crowds and ringing up sales, malls across the country aren’t just adding new experiences as an added attraction, they’re giving over large swaths of space to entertainment companies and expecting them to become the main draws. This includes expansive family entertainment centers, destination experiences such as the new American Dream Mall in New Jersey (which includes an ice rink and indoor ski slope), and experimental installations by art collectives such as Santa Fe-based Meow Wolf.

An art collective called Meow Wolf? Uh yes please!

Redevelopment is much easier said than done. A typical department store would fetch $20 a square foot. For many of the above ideas, it will be less.

What will save malls are people and new ideas. Even before the height of the pandemic, 32% of people said they were uncomfortable going to malls. That's a steep hill to climb.

Malls are dying...So what? Vacant malls are bad. They lead to urban decay, a drop in real estate values, and ultimately reduce government tax revenues. Repurposing and pivoting is the only option. So what for investors? That means you have an opportunity to explore these creative opportunities in your locale.

That's all for today folks. Our local mall actually just reopened, but I don’t have any Bath & Body coupons...so I’m staying home to write this.

🙋‍♂️ Ask a Question

...we reveal which escalator handrail at the local mall we plan on kissing first 💋. Once the pandemic is over of course.

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Written By Brad Cartier

💼 /r MallStreetBets

Mall Street vs Wall Street

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...we reveal which escalator handrail at the local mall we plan on kissing first 💋. Once the pandemic is over of course.