Cash-Out Refinancing for Malls Continues to Rise

There’s been a continued rise in cash-out refinancing across shopping malls and retail centers, according to Patrick Ward, president at MetroGroup Realty Finance.

He tells GlobeSt.com that, this way, retail developers can improve the curb-side appeal of their assets, which in-turn drives greater foot traffic.

For instance, his team recently completed an $18.5 million refinance of a 56,173 square-foot unanchored retail center in northern San Diego. It was to update the center, accordingly, and appeal to changing consumer demand.

“Northern San Diego is a region poised for continued growth and development, and therefore it needs sophisticated and sufficient retail centers to meet the influx of demand,” Ward said.

“Additionally, retail centers are also seeing increased success when they strategically repurpose empty space. For instance, using refinance capital to incorporate a fitness destination or a grocery store that focuses on a particular niche, like Asian cuisine or a health-focused supermarket.”

He said that strategic reaggregates of space such as these drastically increase foot traffic and “spark excitement” amongst local consumers, who increasingly value these particular retail types.

Gotta Have Photo with Santa

As the holidays approach, Ward said he foresees a “hopeful renaissance” for retail centers, especially the ones with a strong omnichannel presence, attractive curb appeal, and an emphasis on exclusive in-person experiences.

“Photos with Santa or an ice-skating rink within large, open-air retail centers cannot be replicated via AI,” he pointed out. “As the country longs to capture the nostalgia of the days before smart technology, retail has an opportunity to meet that demand and give families interactive, engaging retail experiences that outperform the lazy and pre-pandemic era of retail.”

Capitalizing on ‘Evolving Nature’ of Retail Itself

Ward said that during the downtrodden period of COVID-19, many clients wanted to refinance, not just to gain a lower interest rate or negotiate mortgage terms, but to capitalize on the evolving nature of retail itself.

In 2021, MetroGroup worked to secure a $15 million bridge loan for the predevelopment of an adaptive mixed-use office and retail property located in the Arts District in Downtown Los Angeles.

“When people were proclaiming that retail was ‘dead,’ during the thick of the pandemic, coupled with fervent headlines surrounding the superiority of e-commerce, we were working with clients to secure capital for revitalizing their retail centers,” Ward said.

“Today, with retail having made a sweeping reemergence, it goes to show, retail never died, but was merely in transition.

“Many renovations implemented during the pandemic, such as making retail more data-friendly to drive foot traffic, as well as implementing open-air design and interactive layouts that blend seamlessly into adaptive reuse projects, have contributed to the new-found success that we witness today.”

Omnichannel Marketing Making a Difference

As malls showcase resiliency, Ward said, “we can expect retail to continue to lean into the adaptive reuse model, working to compliment other asset types such as office space and multifamily. This focus on adaptive reuse will also meet the growing consumer demand for the 15-minute city, where people can have all their needs met within a 15-minute walk.”

The urban design concept is not only sustainable from an eco-perspective, but is also business friendly, Ward said, as it will encourage people to visit brick-and-mortar retail spaces out of sheer convenience.

Another essential tool when it comes to standing out as a retail center is to invest in omnichannel marketing. For instance, many centers in Los Angeles are incorporating in-house apps that give people the option to visit the mall both in-person or virtually, which keeps customers in a purchasing loop and encourages both digital and physical foot-traffic.