Dying Malls Increasingly Rely On Taxpayer Handouts For Survival

Tyler Durden's picture

America's dying malls have been a frequent topic of discussion of late as these relics of the 80's have been forced to convert once valuable high-end retail square footage into grocery stores, libraries and doctor offices just to keep the lights on.  Here's just a small sampling of the recent carnage:

But, as Bloomberg points out today, one other funding source is increasingly emerging as a key financial sponsor in the efforts of commercial REITs to re-purpose their failing assets: taxpayers.

In Brookfield, Wisconsin, for example, the city is using tax-increment financing (TIF), a common tool for municipalities to subsidize development by putting property taxes from new projects into a fund that pays for building cost, to help rebuild the Brookfield Square Mall. Meanwhile, as if that weren't enough, the city has also agreed to pay for remediation costs related an old Sears auto repair shop and to build a new convention center and hotel where the Sears once stood.

In this depressing landscape, there is at least one player still willing to take the risk: local governments hungry for tax revenues. Developers incorporating additions such as housing and parks in their plans are turning to public partners to help rehabilitate the aging retail meccas that dot the U.S. Public subsidies have been part of retail development for decades, but with landlords pouring billions of dollars into renovation to battle a wave of store closures, public-private partnerships are more urgent, and more fraught, than ever.

 

At the Brookfield Square mall in Wisconsin, the landlord, CBL & Associates Properties Inc., needed a new occupant for a fading Sears. CBL had been tinkering with the mix for the past few years. Earlier, in 2008, it completed a 20,000-square-foot expansion, adding grocery stores and restaurants and renovating the interior.

 

In the end, it found its tenant: the city of Brookfield.

 

The local government plans to step in to build a conference center and hotel. By creating a hub for small and medium-size conventions on 9 of the 29 acres currently occupied by Sears, the city hopes to boost CBL’s efforts to reinvent the property, the largest taxpayer in Waukesha County. The idea is a greater focus on entertainment, recreation and business, according to Daniel Ertl, director of community development for the city of about 38,000.

 

“The Sears store is really a shadow of what it used to be,” Ertl said. “We encourage CBL to continue to reinvent themselves. God knows where retail is going to be in 20 years.”

Mall

As Bayer Properties CFO, Jami Wadkins, who just secured all sorts of taxpayer-funded handouts to rebuild a failed mall in Alabama, points out, public funding is becoming an "important element of the capital stack of every developer."

These expansive developments often secure additional public financing through various forms of tax arrangements and incentives, as well as infrastructure spending for things like parking garages. Such funding has become an important element of the capital stack for every developer, according to Jami Wadkins, chief financial officer of Bayer Properties, a real estate company that develops and manages retail real estate.

 

In Birmingham, Alabama, Bayer worked with the city government to transform the site of the Pizitz, a historic department store that closed in 1987. The Pizitz, which Bayer bought as a vacant building in 2000, was in a rundown neighborhood that lagged behind the revival occurring in other areas of downtown.

 

Numerous plans ended up on the scrap heap before federal and state aid was secured to build a mixed-use community, which opened in 2016. The development houses 143 residential units -- now 90 percent occupied -- a co-working space, a food hall and retailers, including Alabama’s first Warby Parker.

 

The project cost was $70 million, including public and private funds. Bayer was able to obtain a low-interest loan from the U.S. Department of Energy, as well as tax credits from the state. The city paid to refurbish the landscaping in the area, including the sidewalks and street lamps, according to Wadkins.

 

“If you can put a plan together for a city that doesn’t put the city at great risk, then they will invest with you,” Wadkins said. 

To conclude, perhaps no one summarized this lunacy better than Ronald Reagan who succinctly described the Government's approach to economic affairs as follows:

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Malls are clearly now in the "subsidize it" phase of the Government's economic plan.

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nuubee's picture

I wish all commercial real estate investors a happy retirement in a van down by the river.

El Oregonian's picture

Mall-ignant.

It's terminal.

YUNOSELL's picture

The devil is in the retails

Unfortunately, the future does not hold much in store

pods's picture

Go to the mall and mingle with the areas finest Canadians or shop from my home in my boxers?

Hmmm, tough call.

pods

FireBrander's picture

We are standing on the divide between physical retail and no physical retail.

10 years ago, you had to have a physical store to really "make it" in retail.

10 years from now; ~80% of shopping will require no visit to a physical store.

HowdyDoody's picture

"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

If it stops moving and bursts into flames, subsidize it even more (TVM, Elon).

FireBrander's picture

Local "outlet" mall just opened:

1. Outdoor/open-air mall in a snow state - DUMB! - suspect they were trying to save money by not enclosing it...yeah...

2. Only ~50% leased on opening day - mostly typical loser stores; GNC, ToysRus, etc,

3. Two weeks later and one of the stores has already given up - local owner/mom/pop shop - doors locked, lights out, nearly empty of stuff.

...and they're building another new ~20 unit strip mall just a couple miles from this struggling mall!

Total fucking insanity.

This ALL has to built with "Other peoples' money"...no fucking way would anyone smart enough to personall save the required capital, use it to open a mall...

Son of Loki's picture

Has to be because of the extremely low interest rates and failure of banks to foreclose like in the "old days." Malinvestments on crack.

There are literally dozens of new strip malls being built where I live.

Mostly filled with:

1) nail salons;

2) beauty parlors;

3) another dentist;

4) post-net mail type places; and/or,

5) cleaners.

 

What do they produce?

How many fingers are out there that need their nails done so often and for what?

Why do these women think they need to be "beautified" when most simply need to drop about 40 pounds? I can guarantee them that only doing the nails or cutting the hair ain't going to help most of them!

 

FireBrander's picture

"Salons and Parlors"

When I walk by those places, like in walmart, there are some nasty beasts in there...even at $100/hr wage, I still don't think I could touch the nasty ass feet of those beasts.

Half of the women can't even fit in the chairs; fat bulging over the arm rails, down the sides of the chairs, over their knees...OMG...they can't reach their feet which is why they're getting a pedicure...

NASTY!

Never One Roach's picture

"Beasts" is correct!

And I am obligated to agree with the commenter; doing their nails is NOT going to help!

ToSoft4Truth's picture

They're whores trying to get movie roles in between turning tricks on BP or CL.

lasvegaspersona's picture

unfortunately retail has passed the point of no return....it is no longer possible to find anything other than 'bread and butter' in stores...if it is even slightly unusual you'll have to search online and buy through (hopefully not Amazon) a vendor there....cept guitars....guitars ya gotta hear....and play Stairway first!

nuubee's picture

I wish all commercial real estate investors a happy retirement in a van down by the river.

Hunter S. Thompson's picture

I would love to see malls being converted in to something like these Woodward Camps

http://www.woodwardcamp.com/facilities.html

cynicalskeptic's picture

More likely they'll be future FEMA camps.

nuubee's picture

I wish all commercial real estate investors a happy retirement in a van down by the river.

Big Creek Rising's picture

repeating your comment does not make it any more humorous or clever 

nuubee's picture

I wish all commercial real estate investors a happy retirement in a van down by the river.

nuubee's picture

Do I win a prize for an accidental quad-dupe?

847328_3527's picture

It's quite a conundrum to see these dying malls and the ones still open are filled with zombie shoppers---poor latinos, Pakis and blacks looking for Air Jordans to rob...all while CNN reports a "robust economy."

Buck Johnson's picture

Also don't forget the dollar stores that are inside them also.  And  your right, those malls are filled with the exact people you are talking about.  Most malls have become low income places to buy low end products and/or a place to babysit your teen.

 

Son of Loki's picture

The malls are pretty disgusting these days.

yaright's picture

Only a fool would go to a mall around here. If a store is not being robbed then you are lol

cbxer55's picture

Not only that, but here in Oklahoma City, a place where you can legally carry a firearm, they are prohibited in all the malls. Which is another reason why they are dieing here, any sane firearm owner boycotts places where he cannot carry his protection. I do. Haven't been in a mall in years. Won't be either. Fuck em!!

There's an abondoned mall a mile from me. Heritage Park Mall in Midwest City Oklahoma. Back in the 90's it was still a thriving place. Here a few months ago, the last place left doing business there, a Sears, closed for good. Now the only place left is a Life Church in one end of the joint. 

There's a restaurant that still does really good business, in the north east corner of the lot. I frequent the joint. 

Cross Roads Mall, a few miles away, is not doing well since the place has been taken over by the criminal element, again because law abiding citizens are prohibited from carrying firearms in the joint. What do they expect, a mall is just another big gun free zone, that advertises to the criminal element IT IS SAFE TO OPERATE HERE! 

papa song's picture

Yes.  A complimentary preseciption for phenobarbital.

Iconoclast421's picture

You win the Bernank prize. Call Trump. You are now ready to take over for Yellen.

Give Me Some Truth's picture

Re: Commercial real estate investors in the van ...

Shoot, I wish them well. Wouldn't want to be you, etc. 

But somebody needs to "develop" a Dollar General store near my house ... if my family is going to be kept in Hawaiian Punch, 409, food for the dog ... EBT cards accepted of course.

Grandad Grumps's picture

The problem sith capitalism is not the market economy. The problem with capitalism is the corruption at all levels, especially government and banking.

ParkAveFlasher's picture

"Sith capitalism" ... I like that

peddling-fiction's picture

Corruption is the problem of all "isms", when gov is too powerful.

Malls will be great Fusion/FEMA centers on the cheap.

Give Me Some Truth's picture

In Montgomery, the former Montgomery Mall sat empty for about 10 years until the City bought the property for $1 and made a fire station out of the old J.C. Penney's anchor. The rest of the mall space is still available. I'm sure the old Sears' anchor could become/will become a police precinct.

I'm looking at the former Food Court area for "Mother's Day Out" Day Care. The parking lot could become an RV park for RV enthusiasts who are fond of concrete and weeds and don't care about a lack of shade.

 

 

 

 

 

Son of Loki's picture

BLM says putting a police station in the mall be rayciss.

BTW, have you seen the dirty filth the DNC is putting out to trash the Republican for Governor in Virginia?

The DNC even has a video faking him 9Ed Gillespie) running after kids to arrest them or hurt them.

the Dems are so disgusting; fighting very dirty and heavily funded by $18 billion from soros and other alt left Billionaires.

I hope Gillespie wins by a landslide. he's too liberal for me but 1,000 x better then the commie Dem running against him.

kochevnik's picture

In 2008 Democrats made effort to appear centrist.  But now they are something left of Communist Party of Russian Federation

TeethVillage88s's picture

Austerity since 1979, check the Fred chart on Employment in Manufacturing. Followed by Bill Clinton Years of Most Favored nation Status for China, NAFTA, Deregulation of Banking and other industries to allow corporations cross ownership, vertical and horizontal ownership, derivatives of everything, financialization of everything, monopolies of everything, end to Anti-Trust Law, Bi Partisan Campaign finance reform to financialize the US Congressmen & their campaigns & monopolies... and as capital flew overseas and stayed in financial centers overseas... this was huge cut in investment in USA (see Foreign Direct Investment, Domestic investment, International Investment Position BEA)

2016 - 1979 = 37 years.

1970 OSHA after Union Rights & Welfare. 2016 - 1970 = 46 yrars.

Manufacturing:
http://research.stlouisfed.org/fred2/series/MANEMP (12 Million down from 19.5 Million) All Employees: Manufacturing

Information Services:
http://research.stlouisfed.org/fred2/series/USINFO (2.65 Million down from 3.7 Million) All Employees: Information Services

Mining, Drilling, Logging
http://research.stlouisfed.org/fred2/series/USMINE (Peak was 1981, now .9 Million down from 1.3 Million) All Employees: Mining and logging

Goods producing Industries:
http://research.stlouisfed.org/fred2/series/USGOOD (19 Million down from 25 Million) All Employees: Goods-Producing Industries

http://research.stlouisfed.org/fred2/series/A14187USA163NNBR (ratio top 1880)
https://fred.stlouisfed.org/graph/?id=M2V,M1V,MZMV,#0 (M1 Top 2007)
(old figures, not updated below)
http://research.stlouisfed.org/fred2/series/M1V (Top was 2007 Q4 at 10.7, now down to 6.3)
http://research.stlouisfed.org/fred2/series/M2V (Top was 1997 Q3 at 2.2, now down to 1.5)
http://research.stlouisfed.org/fred2/series/MZMV (Top was 1981 Q1 at 3.5, now down to 1.4)
http://research.stlouisfed.org/fred2/series/Mult (Top was January 1987 at 3.1, now down to .7)

https://research.stlouisfed.org/fred2/series/ROWFDNQ027S ($3.6 Foreign Investment USA)
http://research.stlouisfed.org/fred2/series/GPDI ($2.86 Private Domestic Investment)
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm ($32 Trillion in Foreign Ownership in Property in the US compared to $26 Trillion of US Ownership in foreign countries)

http://research.stlouisfed.org/fred2/series/GINIALLRH (Gini Ratio/Coefficient, what? discontinued?)

BLS historical data from CPS-survey shows weekly earnings the same in 1979 as 2017.

Weekly and hourly earnings data from the Current Population Survey

Series Id: LEU0252881600

Series title: (unadj)- Constant (1982-84) dollar adjusted to CPI-U- Median usual weekly earnings, Employed full time, Wage and salary workers

Year Qtr1 Qtr2 Qtr3 Qtr4 Annual
1979 339 334 325 328 332
1980 324 314 315 317 318
1981 317 311 304 314 312
2012 337 335 329 336 335
2013 334 333 330 337 333
2014 339 328 332 338
2015 344 337 337 348
2016 350 343 343 351

Constant Dollars, Weekly Earning same in 1979 as 2016.

Atomizer's picture

Why is Q4 from 2014-2016 missing?

TeethVillage88s's picture

No that column is the Annual figure. I started capture of this data in like 2013 and often too lazy to update the chart or copy old chart.

https://data.bls.gov/timeseries/LEU0252881600

Labor Force Statistics from the Current Population Survey
https://www.bls.gov/cps/earnings.htm
https://www.bls.gov/cps/cpswktabs.htm (Historical Data, Table 2, constant dollars, all workers)
https://www.bls.gov/webapps/legacy/cpswktab2.htm

Give Me Some Truth's picture

Impressive research. On the plus side, growth in "Pay Day loan" and "Title loan" franchises is booming.

State lotteries are doing great.

Trial lawyers have never done more business.

Sales of ground beef and Hamburger Helper have gone up 4X compared to sales of T-bones and filet mignon.

Aspiring actresses in the porn industry report little trouble finding roles.

 

TeethVillage88s's picture

Heard Hookers & Blow, Lobbying in DC, and doing Derivative work are all trending up, but employment may go down due to AI & Robots, Foreign Workers in India in services.

Sorry my figures are not up to date above, but the links are there for your viewing pleasure.

there is always more data to look at.

Tax Credits have grown steadily. It is Byzantine. Payment Where American Opportunity Tax Credit Exceeds Liability for Tax is financial assistance for higher education.

Treasury Dept:
2016 Total Outlays Refundable Premium Tax Credits and Cost Sharing
Reductions (Obama Care Tax Credits) = $30.8 Billion
2016 Total Outlays Payment Where Earned Income Credit Exceeds Liability for
Tax = $60.6 Billion
2016 Total Outlays Payment Where Child Tax Credit Exceeds Liability for Tax = $20 Billion
2016 Total Outlays Payment Where American Opportunity Tax Credit Exceeds
Liability for Tax = $4 Billion

Total $115.4 Billion of which I get nothing of course. I bet immigrants get a lot of this.

GunnerySgtHartman's picture

No, the problem is that we don't have capitalism.  We have cronyism.  And government is not a "level of capitalism;" it is a means of confiscating resources from productive people and giving said resources to those who did nothing to earn them - as far from capitalism as you can get.

Rex Andrus's picture

We have crony facism. EU is even worse.

kochevnik's picture

You have crony financialism posing as capitalism

FireBrander's picture

That is why all "ism's" fail - on paper, they look great - but in reality human nature corrupts them - and we move on to the next "ism".

Except for "Health Care" - nope, that 100% CORRUPTED "Free Market/Capitalistic" system is going strong with boundless profits for all...

onwisconsinbadger's picture

Drumpf and Kushner are real estate men. Only they can fix it. Believe me.

Herdee's picture

I'd put greenhouses on those parking lots and grow leafie greens on solar and wind power.

Give Me Some Truth's picture

Tying this story to another on ZH today ...

I'm curious. Is the "average home" near these malls selling in three weeks?

 

 

WTFUD's picture

Yes, as soon as they dig up the bodies and forensics remove the do-not-enter tape.

chrsn's picture

Shopping kills two birds with one stone:  wastes time AND money

Ben A Drill's picture

When was the last time you went to a mall and actually bought something?

If I can avoid paying state tax I will as long as free shipping still exists, my dollars go online. What’s up with recycling fees. I avoid that at all costs.