Perhaps no property type has taken a harder hit during the pandemic than shopping malls. Estimates vary, but by one measure, their real estate value sank a resounding 60% in 2020 alone, and only about half of the 1,100 or so indoor malls in the country are expected to survive.
Waiting for them at the bottom are savvy investors who can recognize a bargain, either to try to repurpose, revive, or simply pick up the pieces for a low enough price to profit ahead of the decline’s perhaps ultimate destination.
That third way is featured in a Bloomberg Wealth article titled "Billionaire N.Y. 'Bottom Feeder' Buys Malls as Others Run Away" that focuses on Igal Namdar of Namdar Realty Group in Great Neck, New York.
Namdar’s company started out with the 1999 purchase of a single retail storefront on Long Island and, according to its website, now has 268 retail properties with 56,910,950 square feet of space in 35 states.
By comparison, the largest mall owner -- real estate investment trust (REIT) Simon Property Group -- has interests in 251 properties with about 186 million square feet of gross leasable area in 36 states and Europe.
Simon and other major operators have walked away from centers that have become worth less than what’s owed, and some retail REITs such as Washington Prime Group and Pennsylvania REIT, have filed for bankruptcy.
But Namdar is on a buying spree, the privately held company says, averaging more than 20 acquisitions a year over the past four years, including office and medical buildings, shopping centers, and large retail malls.
Finding tenants for struggling centers he bought at bargain-basement prices
The Bloomberg Wealth piece says Namdar’s firm buys struggling centers at bargain-basement prices, typically aging malls in aging cities. It then works with its partner Mason Asset Management to fill vacancies with down-market retailers, all the while limiting spending on debt and capital improvements.
Unlike other mall investors who have repurposing in mind, Namdar said he focuses on the properties as malls rather than redevelopment projects.
"Any seller of retail -- malls or open air -- any size of portfolio, we’re there," Namdar told Bloomberg Wealth. "We can close immediately, as is, where it is, with no due diligence."
And here’s how Jim Costello, senior vice president at Real Capital Analytics, describes it to the business news service: "They’ve been a bottom feeder, historically, buying on the cheap, for pennies on the dollar and making a go of it. It’s not the high end of the market, but it’s solid retail if you can set it up right."
The Millionacres bottom line: Bottom feeders can come out on top
The term "bottom feeders" is a disparaging reference to fish that feed in the muck at the bottom of the water table. Meanwhile, they also are some of the most successful fish families known to nature (think catfish), with the gumption to thrive in tough conditions and make the most of their changing environments for millions, maybe billions, of years.
Maybe they’re onto something, and perhaps so are real estate entrepreneurs like Igal Namdar. Investors who want to replicate his approach have no shortage of places to look, since most cities now have large inventories of empty retail and office space for the taking at the right price, which might be bouncing along on the bottom right now.