The ‘Catch-22’ That’s Keeping Aging Malls Stuck In Limbo

BISNOW|October 24, 2022

Written by: Jon Banister

Hundreds of shopping malls across the country require substantial investment to stay alive in today’s market, but disagreements over how much the properties are worth — even among professional appraisers — have left many of them sitting stagnant.

Redevelopments around the country have shown that dead malls can be revived by adding a mix of uses like multifamily and hotels, but those projects have only been undertaken at a small minority of U.S. malls. Developers who want to pursue more of these projects say the appraisal process has been a key sticking point holding up many potential deals.

Retail experts told Bisnow that appraisers aren’t bringing down the values of malls to what they are realistically worth because they can’t find enough comparable deals. As a result, fewer deals can be struck, and the cycle continues.

“It’s a real Catch-22 happening across the country,” Trademark Property Co. CEO Terry Montesi, whose firm has completed multiple mall redevelopment projects, told Bisnow last week at the National Association of Real Estate Editors conference in Atlanta. 

“Nobody’s selling anything, so there’s no comps, and appraisers just leave the values where they were, even though everybody knows the reason nobody’s selling anything is there’s no liquidity, they’re not worth hardly anything,” Montesi said. “Appraisers aren’t making a guess that a $300M mall is now worth $100M, even though everybody knows that.”

Without appraisers bringing down mall valuations, experts said many owners and lenders have been hesitant to sell assets at a low enough price to allow buyers to make redevelopment deals work. Existing owners have a hard time redeveloping their own properties because…

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