Upsale Sarasota Mall Delayed

This is not all the surprising to most of us in the business. Most retailers are reeling at the moment and the situation is expected to worsen before it gets better. From the Sarasota Herald Tribune.

Upscale mall will be late

By Toni Whitt
STAFF WRITER

Published: Sunday, December 7, 2008 at 1:00 a.m.
Last Modified: Sunday, December 7, 2008 at 12:11 a.m.

SARASOTA - Construction of the new University Town Center Mall featuring Neiman Marcus, Nordstrom and Macy's has been put on hold until the economy turns around.

The move is not surprising given that all of the anchor retailers are suffering from the downturn. Neiman Marcus saw same-store sales drop 14.5 percent in the last quarter. The retailer saw another 11.9 percent decline for the month of November.

Neiman Marcus, which is set to webcast its quarterly report on Wednesday, may have urged the developers to stall the mall project until the economy gets better.

"We're hoping it's a short delay," said Mark Chait, director of Florida leasing for Benderson Development Co., LLC, one of the three partners in the project. He said construction will begin as soon as "economic and retail conditions improve."

It will take two years to build the mall once construction begins, he said.

That means the mall probably will not open before 2012, because most analysts do not believe the economy will turn around before the end of next year.

Nathan Forbes, managing partner of The Forbes Co., would not comment on the retailers on Saturday, but said he plans to issue a formal statement on the construction delay and mall leases later this week.

The other two announced anchors for the mall have also been suffering under the country's economic crisis, with housing prices down, the jobless rate soaring and the credit market contracting. Nordstrom, Inc. saw a 12.1 percent decrease in same store sales in November. Year-to-date same-store sales have decreased 8.6 percent compared with the same period last year.

Macy's, Inc., the third anchor, saw a 13.3 percent decrease in November same-store sales and year-to-date same-store sales were down 4.8 percent. It has also experienced a precipitous drop in its stock price in the past year. It had been selling at around $30 a share a year ago and has since dropped to $8.61 as of last week.

The climate for malls is not good as retailers close stores, face bankruptcy and even shut down.

In a July report, the International Council of Shopping Centers predicted nearly 144,000 stores would close this year.

Mall developments are now facing foreclosure as occupancy rates decline and the delinquency rate on commercial-backed mortgage securities markets rise.

General Growth Properties, Inc., the country's second largest regional mall real estate investment trust, may have to sell the company under the weight of its debt.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

The timing is terrible for the University Town Center project, which had finally cleared the last of several hurdles last month, when the state gave the developers permission to pull permits and begin building.

In an October conference call with investors, the chief executive of Taubman Centers Inc., whose company holds a 25 percent interest in the project, said that if the partners did not find favorable financing for the project, the development group planned to "self-fund" construction of the 900,000-square-foot luxury mall, which he promised would be complete by November 2010.

But in the ensuing weeks, the economy has declined even further and sales the day after Thanksgiving -- known as Black Friday -- did not bring in the sales retailers had been hoping for.

The Associated Press contributed to this report.

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