Spin stories from Simon Property’s bid for General Growth Properties

Shopping centers are always handy for journalists as a one-stop shopping for a plethora of business and financial stories.  And with a large takeover bid putting malls into the spotlight this week, it might be a good time to see how your local centers fare.

Simon Property Group Inc. is making headlines with its $10 billion offer to buy bankrupt rival General Growth Properties Inc.  Given the reach of these two retailing behemoths, chances are this story will have a ripple effect in your backyard.

Chicago-based General Growth, which sought Chapter 11 protection last spring, operates some 200 malls in more than 40 states.  Here’s a searchable directory from the company’s Web site.   Be sure to click around on that page; in addition to traditional malls the company also operates mixed-use, planned communities and neighborhood shopping centers.

The bid from Indianapolis-based Simon Properties apparently includes payoffs for General Growth creditors and even some money for shareholders – who often are left with nothing after a bankruptcy action.  Simon operates more than 300 properties worldwide; here’s its searchable directory.

Once you’ve established which centers in your area might be affected, I’d suggested calling your area’s commercial real-estate gurus.  They may be willing to discuss the relative viability of those properties and how they’ve been affected by the recession.  Get yourself a copy of the center directories (or map them yourself in the case of smaller strip centers) and talk with the real-estate pros and other retail sources about any overlap that you see.  In the event of a merger, would redundancies be a problem, or are the centers geographically and demographically non-competitive?

This is a great opportunity to roam your region’s malls and take note of vacancies, shifts in the retail mix (fewer jewelers, more inexpensive teen-clothing shops?) and other signs of fallout after a lackluster holiday season.

Meanwhile, take a good look at neighborhood strip centers.  I’ve watched a once-thronged one near me go entirely vacant over the past two years.  The manager of one national home-goods chain told me that her store was closing even though it was busy and profitable – the corporation just decided not to renew their lease to limit exposure in Metro Detroit’s rugged economy.  The loss of that store is the final nail in the coffin of a once-vibrant community retail center. You probably are seeing similar examples in your area, and these stories are big talkers among nearby residents.

This Reuters report in January noted that strip-mall vacancy rates are at an 18-year high, according to Reis Inc.  Aside from costing jobs and creating eyesores, retail vacancies push rental revenue down, further depressing the local economy.  Use property-tax records from your municipalities to find owners of these mom-and-pop strip centers. You could get a fascinating narrative feature by documenting a couple years’ ebb and flow of business at just one strip mall.

As always, the International Council of Shopping Centers – which reported that malls reaped a slight year-over-year gain in January — is a good source of comment.  And just by paging through the council’s Web site you’ll get a better feel for industry concerns and challenges.

Aside from operating concerns such as occupancy rate, sales per square foot, employment and tenant mix, keep in mind that commercial mortgages – many due for refinancing, many at risk of delinquency – are forecast to become a major source of economic crisis this year. The Congressional Oversight Panel in a report last week said, “Commercial real estate loans made over the last decade – including retail properties, office space, industrial facilities, hotels and apartments – totaling $1.4 trillion will require refinancing in 2011 through 2014. Nearly half are at present ‘underwater,’ meaning the borrower owes more on the loan than the underlying property is worth.”

The big losers are likely to be regional banks. Ask them about their real-estate portfolios – even if they won’t name specific laggards, they may be willing to discuss general default concerns.  American University’s BankTracker database can help you locate banks with possible problems.

Check with university business schools, turnaround firms, and other creative sources for more insights into struggling shopping centers.  Don’t forget about talking to vendors such as cleaning services, maintenance companies, sign-makers, landscapers and food-service suppliers.