Thursday, March 9, 2017

Simon Sold West Ridge Mall At Right Time

By Michael Hooper

It's all about timing.

When Simon Property Group (SPG) sold off West Ridge Mall in Topeka in 2014, the property had already declined substantially from when it opened in 1988. But it was a good time to get out.

In 2014, Simon Property Group completed the separation of Washington Prime Group Inc, which became an independent public company traded on the NYSE under the symbol "WPG".

Washington Prime (WPG) owns interests in 120 shopping centers, including West Ridge Mall, 1801 SW Wanamaker Road in Topeka and West Ridge Plaza at 21st and Wanamaker Road.

You can see at the bottom of this Web page that West Ridge is managed and leased by Washington Prime Group.

Vanna White took part in the ceremony to dedicate the opening of West Ridge Mall  in 1988.

West Ridge Mall was a spectacular success in the beginning. Briman’s Leading Jewelers operated for 22 years in the mall before leaving around 2010.

“We were losing money,” Rob Briman told me in a recent interview. “The economy tanked.” Briman said the company focused its efforts on its already existing downtown location. “We own the building downtown. It’s cheaper to operate.”

Briman said business was good for many years in the mall but near the end traffic had really declined substantially. 

“That place is a ghost town,” Briman said.

He’s right. I took a walk through the mall recently and found a few old people walking around the mall. Some sat in the food court and drank coffee. The food court used to have 10 to 12 restaurants, now there was just four. Chick-fil-A moved out of the mall into a stand-alone restaurant and doubled or tripled its business, with the drive-through constantly with traffic. 

Many of the stores still remaining in the mall aren’t doing very well.

For awhile the teen market did well in the malls, many kids went there in the 1990s through the mid 2000s. But then something happened. Youth decided to take their business elsewhere.

There is a disturbing trend among mall-based teen fashion retailers. The Limited and Wet Seal went out of business completely in the past couple months. Vanity Shop of Grand Forks Inc. recently announced plans to close 140 Vanity stores across the country after filing for bankruptcy protection. The only reason Aeropostale (NYSE:ARO) is still in business is because mall owners bought a piece of the company out of bankruptcy. Teen fashion retailer The Buckle (NYSE:BKE) is struggling and headed for disaster if it doesn't change course quickly.

Jessica Rankin, a Washburn University student, recently told me young people's shopping habits have changed. "I think it's also partially due to my generations changing mindset when it comes to consumerism.," she said. "Most of my friends who I go to Washburn University with shop local, and at used clothing stores like God's Storehouse on Wanamaker. For them and myself included, it's not only cheaper helping us save money, all of us are also more interested in buying second hand items to help reduce the amount of trash we create. Minimalism is a big topic that becoming more well known, and I hope it becomes more then just a trend. A lot of my friends also focus more on ethical shopping- as most of the clothes in the mall and other name brands come from free trade zone companies who exploit underprivileged women forcing them into horrible working conditions with little pay. I'm hoping the fast shopping trend will die away completely."

Consumers also are shopping over the Internet. You can buy anything in the world over the Internet. Amazon has probably killed more retail brick and mortar businesses than any other competitor except perhaps Walmart.

Stock in West Ridge Mall's owner, Washington Prime (WPG), is down 60% since it began trading at around $20 per share in 2014. Its $1.00 per share annual dividend does not look sustainable given that its earnings was only $0.29 cents in the past 12 months. WPG stock recently closed at $8.08 per share. Be careful. This stock will decline further if the dividend gets cut.

Meanwhile, Simon Property Group (SPG) stock is up 11.4% in the past three years. Its dividend looks fairly reliable, but REITs are struggling right now because of rising interest rates and the secular decline in mall traffic. Simon still owns a lot of commercial real estate. Simon owns an interest in approximately 210 properties in the United States, which consists of approximately 110 malls, 70 Premium Outlets, 15 Mills and 12 other retail properties in over 35 states and Puerto Rico. 

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