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Feldman Equities is looking to acquire floundering regional shopping malls and redevelop and re-lease them so that they can flourish alongside behemoth retailers such as Best Buy, Wal-Mart and Target. Larry Feldman, president and CEO, said the company's plan is to create shopping centers that offer alternative retail shops or entertainment facilities, such as movie theaters, that instead of competing head on with the mega stores will draw similar shoppers and allow them to coexist.
As part of this strategy, Feldman acquired the Harrisburg Mall from Prudential Financial for $20 million and plans on replacing exiting tenant Lord & Taylor, which is vacating about 200,000 square feet of space, with burgeoning retail store Bass Pro Shops and discount store Boscov's. "You can't just buy the same old mall and tenant them with a JCPenney and Sears," he said. "You've got to make the mall Wal-Mart resistant."
The company believes that hunting and fishing stores such as Bass Pro, which is reportedly seeing $1 billion in annual sales, will attract the same shoppers that frequent Best Buy and Wal-Mart. Bass Pro boasts indoor/outdoor fishing ponds and rock climbing walls. Last year about three million people visited, he noted. Feldman plans on spending about $60 million in physical and cosmetic improvements to prepare the 1969-vintage mall for occupancy by its new tenants.
Feldman looks for deals of 500,000 to one million square feet and prefers to acquire its properties for well below replacement cost. Replacement cost for small to mid-sized malls is around $140 per square foot while Feldman's sweet spot is around $100 per square foot. It also prefers properties that will have some re-development component. The company seeks to achieve internal rates of return of at least 20% and uses leverage of about 66%. "We are not financially engineering deals; we are employing real estate strategies. We are not trying to lever up to the hilt," he said.
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