Last week, I attended the International Council of Shopping Centers (“ICSC”) Show in Las Vegas. As I expected, the general mood was down. Attendance has been cut in half over the past two years’ conventions. It has become clearer and clearer that cash is king in the shopping center investment world today. The dark clouds hanging over the industry are the billions of dollars of mortgages that will need to be refinanced over the next four years. Most investors at the conference believe that if they can stay in business, it will provide the opportunities of a lifetime.
In the middle of the conference, the government announced that it would start buying these commercial-backed mortgage securities that were issued over the past five years from the TALF funds, starting in late July. Many investors think this will provide some liquidity and deal flow to the marketplace.
The majority of investors I spoke with believe we are skidding across the bottom of this cycle. Shopping Center sales are definitely still getting done across the country, typically with motivated, debt-burdened sellers and at rates of return between 8.5% to 10% for the properties that need to trade at this moment.