Shopping for B-Malls: Investing for Stable Cash Flows and Value Creation

Abstract

Executive Summary• The most compelling B-mall investment strategy is to acquire B-2 malls that have the potential to move up to the B-I level. • High barriers to entry and population demographics in their suburban locations make B-malls attractive. • Secondary malls typically price at below replacement cost. B-grade shopping malls have evolved into an extremely attractive real estate investment product. A B-mall is a regional shopping center that, relative to an A-mall, suffers from advanced age, a secondary or tertiary location, and/or mismanagement. The positive attributes of most B-malls, however, include strong and consistent cash flow production, high leasing demand, exceptional locations, functional and fungible physical plants, and trading values that are below replacement cost. Understanding the attributes that make B-malls successful and then realizing their intrinsic value by designing and executing proper rehabilitation, retenanting or expansion plans will increase cash flow and value for the savvy owner/manager.