Podcast Summary
Dilapidated Berkshire Mall: Raw Sewage on Sidewalk: The Berkshire Mall, once a popular community hub, is now described as dilapidated with numerous maintenance issues including raw sewage on the sidewalk, and the owners consider it a profitable asset, but lack investment in revitalization
The Berkshire Mall, once a popular hangout spot for teenagers in Eastern Pennsylvania during the 1990s and early 2000s, has significantly declined and is now described as dilapidated, deteriorated, and depressing. The mall, which is owned by Namdar Realty Group and Mason Asset Management, has numerous maintenance issues including sinkholes, damaged electrical components, pest control needs, roof leaks, water damage, and holes in ceiling tiles. The most alarming issue was raw sewage, including human excrement, flowing onto a public sidewalk at the main entrance. Despite these challenges, the current owners consider the mall a profitable asset and are working to fix some of the maintenance issues. However, the lack of investment in revitalizing the mall to regain its former popularity as a community hub is frustrating and disappointing to many.
Buying Undervalued Malls and Selling Off Valuable Assets: Namdar Realty Group profits by purchasing malls at low prices, selling off valuable assets like retail and restaurant properties, and keeping the remaining mall operational with minimal costs.
Namdar Realty Group, a privately held real estate company, has capitalized on the declining value of malls by purchasing them at rock-bottom prices and then selling off valuable assets, such as freestanding retail and restaurant properties in their parking lots. Their strategy is to buy the entire mall, including the surrounding parking lot, and then sell off parts of it to make a profit. The malls themselves are kept operational by collecting rent from tenants, many of whom are call centers and local small businesses. Namdar keeps costs low by operating with a lean staff and minimal upkeep on the mall property. The company's success lies in their ability to buy malls for much less than their previous value and then sell off valuable assets while still making a profit from the remaining mall operation.
Negotiating Lower Property Taxes: Successfully reducing property taxes by appealing to local governments, saving around $500,000 per year, but concerns over property maintenance and code violations
Namdar and Mason's business strategy includes negotiating lower property taxes after purchasing malls. By appealing to local governments and arguing that the properties are worth less than previously assessed, they have successfully reduced property tax bills significantly. For instance, the Berkshire Mall saw a reduction from over $660,000 to approximately $95,000 in annual taxes. This strategy allows them to save around $500,000 per year. Their financial success is evident, with record-breaking tenant sales in 2021 and 2022, and a reported gross profit of $86.7 million in June 2023. However, their ownership of malls has been met with local community concerns, including issues with property maintenance and code violations. The example at the Berkshire Mall showed clear signs of neglect, such as evidence of mice and lack of maintenance. These challenges highlight the importance of transparency and understanding the unseen struggles faced by those we work with, which can lead to healthier companies and communities.
Neglecting Mall Maintenance Can Lead to Significant Problems: Neglecting routine maintenance can result in numerous code violations, potential condemnation, and business closures, negatively impacting local communities.
Neglecting routine maintenance and upkeep can lead to significant problems, as evidenced by the Berkshire Mall's situation. The mall, owned by Namdar and Mason, faced numerous code violations, including damaged electrical components, pest control issues, roof leaks, and water damage. The most recent batch of violations, which included the threat of condemnation, led the company to take the issues seriously and address major concerns, such as a sewage leak. However, there are still numerous other code violations that need to be resolved, and the mall is facing similar issues in other locations. The situation highlights the importance of regular maintenance and the potential consequences of neglecting it. It also underscores the impact on local communities when malls fall into disrepair, leading to businesses leaving and financial struggles. Ultimately, it's in the best interest of the property owners and the community to invest in repairs and maintenance to prevent further deterioration.
Repurposing dying malls into mixed-use developments: Malls facing decline may be repurposed into mixed-use developments, including residential, educational, medical, and indoor recreational facilities, as a potential solution to their demise. However, it's uncertain if this model will catch on widely.
The retail industry, specifically malls, is undergoing significant changes, and some malls may not be able to adapt, leading to their eventual demise. Namdar and Mason's business strategy of repurposing dying malls into mixed-use developments, including residential, educational, medical, and indoor recreational facilities, could be a potential solution. However, it's uncertain if this model will catch on widely among other companies. The process of a mall dying is a long and complicated one, and some companies may hold on to them for as long as possible, even if it means cutting costs and extracting every last dollar before closure. This is reminiscent of private equity companies buying declining industries, such as newspapers, and milking them for profit before closure. It's a painful process to witness, but it may be necessary for the retail industry to evolve and adapt to changing consumer preferences.
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