(BLOOMBERG) – Mr Igal Namdar has made a fortune buying shopping malls no one else wants.
He scoops up struggling centres at bargain-basement prices after their landlords lose faith, betting he can turn a profit before the last tenants turn out the lights. So far, that strategy has netted big gains – as well as lawsuits accusing him of letting his real estate slide into disrepair.
In building an empire of 268 properties in 35 US states, he has accumulated a personal net worth of about US$2 billion (S$2.7 billion).
The coronavirus pandemic accelerated the shift to e-commerce, forcing many already-ailing department stores and apparel shops to go dark. Landlords that own lower-end malls – with high proportions of tenants that have fallen behind on rents or shuttered stores – have been hit especially hard.
For Mr Namdar, that smells like opportunity. He expects a flurry of deals next year as more owners of troubled retail properties head for the exits.
“Any seller of retail – malls or open air – any size of portfolio, we’re there,” Mr Namdar, 51, said in an interview from his base in New York. “We can close immediately, as is, where it is, with no due diligence.”
The formula for Namdar Realty Group and partner firm Mason Asset Management is to recruit down-market retailers to fill vacancies while holding down costs by limiting debt and capital-improvement spending.
His bet is that he can pay a small enough price to outrun the decline. He said he sees value in the properties as malls, where other investors in the market are more interested in redeveloping them for other uses.
Mason president Elliot Nassim, 40, whose cousin married Mr Namdar, focuses on leasing and redevelopment while the latter oversees property management. They don’t pretend to cater to luxury consumers. They say they charge affordable rents so stores can fill vacancies.
One centre, the Eastdale Mall in Montgomery, Alabama, is now 100 per cent leased, up from 70 per cent when it was purchased in January last year for US$24 million.
Their first purchase, in 2012, was the DeSoto Square Mall in Bradenton, Florida. They sold it in 2016 for US$25.5 million to ML Estate Holdings, which sued two years later, contending the property had lower revenue and higher costs than represented.
Mr Namdar has also been sued by retailers: International Decor Outlet in 2017 accused the landlord of contract breaches like malfunctioning air-conditioning, substandard repairs and inadequate security at the Regency Square Mall in Jacksonville, Florida.
At the same property, Impact Church of Jacksonville accused managers of making the “building look abandoned”. Impact paid US$7.4 million in 2016 to buy a former department store on the site, where it now runs a school and a church. The price was more than half the US$13 million Namdar paid for the entire mall, which names 46 other tenants on its website.
Mr Namdar said: “There were factors that led to this, such as not having the rent to pay. Properties that are marked for redevelopment are few and far between, so we maintain our assets.”
Besides buying properties, the company has acquired potential tenants, such as cinema chain Goodrich Quality Theatres and a furniture chain.
Among recent mall deals was the US$10.3 million purchase in April of Marketplace at Brown Deer outside Milwaukee, valued at US$45 million in 2005, according to loan documents and an announcement by the seller, Retail Value.
“We’d like to improve our quality but we’re not going to pay a crazy premium for an A-mall,” Mr Namdar said. “Our goal is to stick to those B and B-plus assets. Those A’s get to be too crazy. The Ferraris of the world – that’s not the kind of car we’re looking for.”