Buying unprofitable shopping malls after banks or owners have given up is where an Augusta-based commercial real estate firm is growing its portfolio.
Hull Storey Gibson Companies LLC recently bought its 20th enclosed shopping mall, Village Mall in Auburn, Ala. This was the third mall they have acquired in 2012, bringing their total retail square footage to nearly 13 million, and partner John Gibson said they will continue to pick up properties that are deals with good potential.
“Lenders are starting to capitulate to market forces and are selling properties,” he said. “We’re buying at a good and fair price properties who need only one thing, a good owner with good management.”
The west Augusta firm bought Piedmont Mall in Danville, Va., and Liberty Fair Mall in Martinsville, Va., earlier this year. Those malls are more than 700,000 and 400,000 square feet respectively.
Piedmont Mall was formerly owned by a subsidiary of General Growth Properties, which owns Augusta Mall. Liberty Fair Mall was purchased from the U.S. Bank National Association acting as trustee for registered certificate holders of J.P. Morgan Commercial Mortgage Finance Corp.
Before the acquisitions, Hull Storey Gibson tied for 42nd place in Retail Traffic magazine’s Top 50 Owners of Retail Space for 2011. Leaders such as Simon Property Group and General Growth Properties have gross leasable area in the neighborhood of 200 million square feet each.
Hull Storey Gibson does not buy the shopping malls to attempt to make a profit on immediate re-sale. Gibson said the firm will continue to acquire properties that fit their method of redevelopment.
Hull Storey Gibson only buys malls located within counties of 100,000 people or less, making Augusta too large for the model.
“We don’t really have an exit strategy,” he said. “We’re operators, so when the opportunity comes along to acquire a good property, that’s what we’re looking for.”
Jerry Wit, is a senior vice president at St. John Properties, which recently acquired the Harrisburg Mall in Harrisburg, Pa. He said distressed commercial real estate is just now being released by the banks.
“When this recession first started, a lot of us started to lick our lips, anticipating some real rock-bottom prices,” he said. “Five years into the recession, we’re finally seeing some of these banks releasing some properties.”
Cal Evans, regional appraiser with Synovus-Augusta First Bank and Trust, said while Georgia’s community banks disposed of toxic assets in 2008 and 2009, properties owned by larger, national banks are just now hitting the market.
“Hull Storey Gibson is really establishing the template for this,” he said. “They certainly have the expertise and management style, and they’re getting the right kind of new anchor stores.”
In the aftermath of the recession, Evans said, consolidation and contraction are in place all over the country to increase efficiency and bring back profitability.
Hull Storey Gibson understands this, Evans said, and is able to spot distressed properties that they will be able to turn around.
“They’ve got a really good theory going,” he said.
In the 2000s, too much retail space was created per capita, and the unsustainability has become apparent, Gibson said.
“A lot of stuff was built that did not need to be built,” he said.
That growth was deceptive, he said, because demand for more retail was there because it was easier for people to get credit cards and borrow money, and not because there was an increase in the ability to afford these purchases.
“This boom in retail activity was based on the unsustainable increase in debt,” he said.
Hull Storey Gibson employs 100 people, with 55 in the Augusta headquarters and 45 in the malls. Malls will usually have two company representatives on site, and the rest of the staff is contracted out.
The Augusta-based management staff travels frequently, Gibson said, keeping their three company planes flying every day.
“We don’t believe in maintenance,” he said. “We want to improve, get better, every day.”