GRANDVILLE — A 20-year-old mall in southwestern Kent County could potentially turn into a mixed-use “mini-city,” or be repositioned for a sale.
Executives with international real estate firm Brookfield Property Partners LP, which acquired Rivertown Crossings Mall owner GGP Inc. last summer, told analysts they believe the firm’s portfolio of 125 shopping centers is primed for significant redevelopment.
That investment could include new residential, office and entertainment uses at the malls, according to executives. However, a smaller group of the malls in the portfolio could see more muted redevelopment work in the hopes of making them more attractive to a new buyer.
Speaking last month on a conference call to discuss the company’s third-quarter performance, Brookfield CEO Brian Kingston said about 100 of the malls the company acquired from Chicago-based GGP are candidates for turning into “mini-cities” in an effort to “future-proof” them for long-term success. Another 25 malls could undergo lesser redevelopment in the hopes of selling them off, he said.
“I think that the intensity will vary depending on which market they’re in and the size of the market and how much demand there may be locally for some of these other uses,” Kingston said.
He noted the 100 malls from the GGP portfolio targeted for large-scale redevelopment represent about 90 percent of the value of the acquired assets, for which Brookfield paid about $15 billion.
It’s unclear where the 1.2 million-square-foot Rivertown Crossings Mall fits in Brookfield’s plans. A spokesperson for the company did not respond to a request seeking comment.
Still, commercial real estate sources say that given the size of the West Michigan market compared to other regions around the country where Brookfield owns shopping centers, a new mixed-use mini-city in Grandville seems like an unlikely outcome.
“I tend to think that given the Brookfield portfolio, this might not be a big enough market for them to get into a full-scale renovation of this mall,” said Matthew Mason, a managing director in the Detroit office of turnaround firm Conway MacKenzie Inc.
“That doesn’t necessarily mean the mall is going out of business,” Mason added. “It could just mean that it doesn’t fit (in Brookfield’s) bucket and then they would likely bring in a mall operator who’s probably a little smaller in scope that has more interest in repositioning a mall such as this.”
Mason notes that Rivertown Crossings still has a good set of anchor tenants, although its Younkers store closed earlier this year. Sears, another anchor tenant, continues to go through a bankruptcy reorganization. It’s unclear whether the legacy retailer will emerge or be liquidated.
“For a mall like this, if Sears leaves, then there’s a significant amount of distress that’s there,” Mason said. “On the other hand, there’s opportunity to redevelop this into something that looks different than it is today.”
To that end, the owners of Rivertown Crossings’ main competitor, Woodland Mall in southeast Grand Rapids, bought out the lease of its Sears store to redevelop that wing of the shopping center and bring in high-end tenants such as Von Maur in its place, as MiBiz previously reported.
Executives with Pennsylvania Real Estate Investment Trust Inc. (PREIT), which owns Woodland Mall and is investing $100 million into the shopping center, view the redevelopment of aging retail facilities in similar terms to what Brookfield has proposed.
Speaking with analysts during an earnings call in late October, PREIT chairman and CEO Joe Coradino said that renovating aging anchor stores serves as just one side of the equation and that further diversification away from the pure retail sector is necessary.
“We’ve substantially reduced the downside risk associated with our portfolio and in so doing improved our growth profile,” Coradino said. “But it’s not just about anchor space. We continue to take bold action as the industry evolves, and incorporate users that are outside of the traditional mall paradigm.”
Over the last couple of years, PREIT executives have pointed to Woodland Mall as an example of the redevelopment potential with higher-end retail stores and more dining and entertainment options.
Mason with Conway MacKenzie referred to Woodland as a “core” mall in PREIT’s portfolio.
But Mason was skeptical whether Brookfield executives would view Rivertown Crossings in a similar light.
“Given what we know about this mall, do I think they consider this to be a core mall? I would say that’s pretty questionable,” Mason said.
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