Bad for the store, bad for the mall
Malls across the country are entering foreclosure as store sales are down and mall owners can't refinance in times of tough credit. Nancy Marshall Genzer looks into the credit crunch's effect on malls nationwide.
A vanacy in a Chicago strip mall (Scott Olson/Getty Images)
More on Housing - Real Estate, Retail, America's Financial Crisis
TEXT OF STORY
Scott Jagow: Over the weekend, shopping mall owner General Growth Properties avoided bankruptcy -- barely. It got a two-week extension on -- you guessed it -- mortgage loans. More from Nancy Marshall Genzer.
Nancy Marshall Genzer: General Growth Properties isn't alone in its misery. Malls across the country are entering foreclosure. They're victims of the same credit crunch that poisoned the housing market. You have to borrow a lot of money to build a mall.
Retail analyst Howard Davidowitz says when times were good, developers built too many malls.
Howard Davidowitz: All of these guys over-extended, took on too much debt. There was no room for any mistakes, and they hit the wall and they're gone.
The loans from the good times are now coming due. Mall owners can't refinance. They have to pay up.
But Harvard marketing professor David Bell says malls are low on cash right now. Most stores pay them a percentage of their sales. And sales are way down.
David Bell: If store sales are off 20 percent, then the mall owners' income is off 20 percent.
Stock in the biggest mall owner in the country, Simon Property Group, has fallen by half since the beginning of October.
I'm Nancy Marshall Genzer for Marketplace.
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