NEW YORK, May 23, 2011 /PRNewswire/ -- In a statement to investors this week, analysts from research firm Bourbon and Scotch declared skepticism on enclosed shopping malls. "Bourbon and Scotch LLC" is a newly formed private research company which, according to EVP Simm Korban, "focuses on protecting our clients from savvy sellers desperate to rid themselves of trash they once called opportunities." "Much of 2007's financial turmoil can be attributed to tide-following analysts paid to manipulate financial models to obtain positive projections without bothering to digest their assumptions and data." True to their colors, Bourbon and Scotch released a report urging investors to reconsider the feasibility of enclosed shopping malls in a statement to investors which included:
"Since the 1950s when the first enclosed malls were created there have been over thirteen hundred malls built in the United States. Undoubtedly, shopping malls changed the way Americans did their shopping. The early malls moved retailing away from dense, commercial downtowns into the largely residential suburbs. The formula of enclosed space with stores attached accessible only by automobile became a popular way to build retail across the country. For many years the mall was the center and life blood of their surrounding communities. Over the last ten years however, the retail landscape has changed significantly. Lifestyle centers have become in vogue and have lured away many of the tenants that formerly inhabited enclosed malls. Additionally, lifestyle centers cost significantly lower to run as being outdoors does not require air conditioning or the maintenance of vast indoor space. Let us examine how the changing view of retail is threatening many of the older retail establishments and invigorating the newer ones. We will do a case study of a number of malls.
BRAZOS MALL- BRAZOS, TEXAS
When this 700,000-foot mall was built in 1979 it was the center of the small city of Brazos, Texas, and quickly became the hub of the entire town. It was stocked with many of the large national retailers and created a visible sense of excitement in town. Recent years have brought the opening of many new lifestyle centers to the area while Brazos Mall has become a relic and may very well become what is known as a 'dead mall.' Sales at Brazos, once at $350.00 per foot, have been on a steady decline and are now below $200.00 per foot. Soon after the 2010 holiday season a wave of terminations hit the mall and its income has been in a steady state of decline. Tenants such as Pacific Sunwear, Coach House Gifts, Magic Shots, Children's Place, Spencer's Gifts, GNC, and Hot Topic all entered this mall when it was the 'town' center. Changes in the industry have caused their sales to shrink to the point where these stores are losing money. Their anchor stores Dillards and Palais Royale are in imminent danger of closing as their cost of occupancy far exceeds their profitability. Other tenants such as Rack Room Shoes, Hibbetts and Victoria's Secret will likely leave in the near future. Very often these buildings are converted into storage space or are just "scraped" (the industry lingo for demolished to avoid the landlords having to pay taxes). Typically, when a malls price goes below $200.00 per square foot it is considered a failed mall and often gets boarded up (In fact, a list of all malls in the United States which have gone under can be found on a website called deadmalls.com). These older malls also have huge capital requirements. In Brazos the entire roof and HVAC system are from the original construction of 1979."
The statement also included detailed analysis on lifestyle centers proving that they have indeed become the viable alternative to shopping malls in secondary markets. The statement concludes "It's really a fight to the death. Will shopping malls be the dinosaurs or will the new lifestyle centers become financially unviable?"
SOURCE Bourbon and Scotch LLC