Macerich and the Mall by guest blogger Homer Leroy


Editor’s note: Guest blogger Homer Leroy has done some research on wildly profitable Macerich, the folks who GEOrgia keeps telling us are going to build a mall in GY “any day now”.  The same folks who got GY to spend up to $71 million  of your money to put in the infrastructure for Macerich’s mall, the same folks who are collecting HALF of all sales taxes paid to GY at the existing shopping center which preceded the mall at the corner of PC Parkway and McDowell.  GEOrgia and city council praise Macerich, tell voters that Macerich is “working with GY” to bring a mall here just as soon as possible and that they are “good corporate citizens.”

HA!  The only good corporate citizenship about Macerich is that THEY WATCH OUT FOR THEIR SHAREHOLDERS!  Just as a good private company should.  Is Macerich in the mall business to help out little old GY?

Read Homer’s article and you decide.

Stupid is as stupid does, GEOrgia.

Macerich Plays Hardball  by Homer Leroy
Macerich Co. faces foreclosure on Fiesta Mall in Mesa, they already had a Mall in Prescott foreclosed on, and they have sold interests in numerous other Arizona properties recently.  It’s called the “profit” motive, and I don’t blame them for doing the best for their shareholders.  Should GY expect Macerich to behave in GY’s best interest like GEOrgia and GY city council seem to want us to believe? Here are some FACTS to consider before you answer that question.

Common knowledge is, if you asked a GY city council member or executive city employee they would tell you how great the planned Estrella Falls mall is coming along, and how accommodating, splendid, and caring about the future of GY the nice folks at Macerich are.  Just that pesky recession.
What recession? By economist’s standards the recession ended over 3 years ago in mid 2009 to early 2010 depending on whom you ask. So what is keeping bulldozers from pushing dirt tomorrow? As in most measures requiring a shred of business savvy, your council is ill-prepared and easily outwitted by the anything but benevolent Macerich, a publicly traded REIT (Real Estate Investment Trust) out of Santa Monica, CA.
Macerich’s Fiesta Mall, Mesa.
Fiesta Mall is currently only worth $39.5 million – a huge dip from the $140.6 million appraisal value of 2004, which is when Macerich Co. purchased the property for $135.3 million.  According to the Phoenix Business Journal, Macerich owes $84 Million on the property with a Note coming due next year.  The Lenders (Bank of America was the lead bank on the Commercial Mortgage Backed Security transaction at origination)  has transferred the loan to a special servicer (aka, someone who will restructure or more likely set up and run the foreclosure and post foreclosure auction process, the article notes that the servicer has notated the loan as “foreclosure” status since April). Link to the article: http://www.bizjournals.com/phoenix/news/2013/07/19/mesas-fiesta-mall-may-be-facing.html?page=all
Other Macerich AZ Transactions
Perhaps more telling about Macerich’s feelings about the Arizona market and their commitment to it are the following property transactions in the past year:According to Macerich’s 10-Q filing for the first quarter, the REIT sold its 50 percent interests in the Chandler Village Center and the Chandler Festival community center in March last year. The REIT and its joint venture partner also sold the SanTan Village Power Center in Gilbert that same month. In April last year, it sold The Borgata in Scottsdale — which now is being razed for future development of a condominium complex by Scottsdale-based AV Homes Inc. — as a way to pay down its line of credit and for other “general corporate purposes,” the filing said. (my words: PAY DOWN CREDIT LINE are the key words- Macerich’s lenders are not happy with it and are requiring them to dispose of assets to pay down its debt)In May, Macerich sold the Hilton Village community center in Scottsdale and its 50 percent interest in the Chandler Gateway community center. Also that month, the REIT conveyed the Prescott Gateway shopping center to the lender “by a deed-in-lieu of foreclosure.”What this shows, is that this $8.5 Billion market cap REIT (ticker symbol MAC), who has lost one Mall (Prescott Gateway) to foreclosure and is about to lose another (Fiesta Mall in Mesa), who has been selling performing properties in Arizona to raise cash to de-leverage its Balance Sheet, cares only about what is best for its stockholders via its share price.  (Duh! that is the point of capitalism, GY do you understand that?  Getting stupid cities to give you stuff for free is good for the shareholders.)  The company was so far underwater on the Prescott Mall, and is so far underwater on Fiesta Mall in Mesa that simply letting them go is the right business decision  and they have no problem going that route and screwing over whomever that may impact in the local community. They structure loans, intelligently, that only the single purpose entity holding title to the mall pledged borrows, the parent company does not, so it does not negatively affect their corporate credit rating.

How This Applies to GY Estrella Falls Property
Since the development of the Estrella Falls mall may remain economically unfeasible in Macerich’s eyes, they certainly will have no problem sticking GY will the tab of the infrastructure improvements the City floated on its own dime. Heck, they profit by continuing the current arrangement where they pay nominal interest payments to the city while they collect much more each year in sales tax revenue from the existing shopping center.  They didn’t put up the capital for the infrastructure, YOU DID.  They did not think twice to stick the Banks that made the CMBS loans on Prescott Gateway or Fiesta Mall when the market moved against them.  The company reported $18MM of Net Income for the quarter ended 3/31/13, and had $69MM in unrestricted cash on its Balance Sheet at the end of the quarter as well per its SEC filling for that period.  GY better start playing big boy baseball with Macerich and pushing the issue on development or pushing them out of their land position to someone who will. As mentioned prior, GY already blew it by not attracting Tanger Outlets who located at Westgate in Glendale, well after the Estrella Falls project was stalled out.

Anyone want to bet that there will be renewed announcements from city hall just before the next election that, “the mall is about to be built”.  Dream on, GEOrgia.  Politics or unbridled stupidity, you be the judge.

Homer Leroy
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2 Responses

  1. Knowing Georgia very well my vote goes for unbridled stupidity coupled with a vindictive and spiteful personality that very few can fathom. Only those in her inner circle really know who she is because birds of a feather flock together.

  2. The deal for the mall is very similar to the deals inked between the City and residential/commercial/industrial developers in development agreements. The exchange of money works differently, but they are similar. Developments like Amaranth, King Ranch, Las Brisas are similar. If you want to discuss lopsided deals, check out the deals made between the City and Charles Keating (AMCOR) in the mid to late 80’s…

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