Mall REITs plan residential units for prime properties

GGP, for one, announced plans to team up with residential developer AvalonBay Communities for the addition of a residential component to a Seattle-area retail center. “High-quality retail centers can be densified with other users, given the location and market demand,” GGP Chief Executive Sandeep Mathrani told investors on a third-quarter earnings call. “We're all about live, work, play and creating mini cities.”

A residential condo addition at GGP’s Ala Moana Center, in Honolulu, has pulled in about $900 million and is 95 percent sold, Mathrani told investors.

There is demand for residential development at 32 GGP retail properties, Mathrani said. “The only reason the residential developers or hotel developers or office developers are even interested in this location is because it has a very strong retail base,” he said. “I think people tend to forget that if there was no retail base and there was no start of a community, you couldn't attract those users.”

Within these sorts of partnerships, GGP contributes its land at the fair market value, said Mathrani. “They match funding for the land value, and then, thereafter, we're 50-50 partners,” he said. “They manage the asset, they lease the asset, and we continue to be a 50-50 joint-venture partner.”

Simon, meanwhile, has aspirations for its King of Prussia (Pa.) property to become a major mixed-use district similar to New York City’s Hudson Yards development. Simon Chairman and CEO David E. Simon told investors that he expects to boost the value of the asset from $2 billion to $3 billion by adding hotel, residential and office buildings.

And PREIT, for its part, sold five acres at its Exton Square Mall property, in Exton, Pa., for the development of 100 residential units. “Densification is clearly the way to go,” said Bob McCadden, the firm’s CFO. “Residential is a good use right now.”