Mall landlords looking to breathe new life into their struggling properties are finding their hands tied by a decades-long tradition of giving anchor tenants say over how a shopping center is developed.
As landlords used department stores to draw in suburban shoppers years ago, they signed contracts known as reciprocal easement agreements that give their anchors the power to dictate things like parking signage and the types of operators allowed in a center, Bloomberg reported.
“Twenty or 30 years ago, they made sense,” said Ryan Rivera, a partner at the law firm Hartman Simons & Wood LLP. “Today they are a hindrance.”
REAs give anchor tenants the final say over blocking new tenants like gyms, bowling alleys and medical services – just the types of operators that landlords are courting to revive their struggling centers.
“These documents prohibit any other use that’s inconsistent with a first-class shopping center,” Rivera said. “Think of a bowling alley in a typical enclosed regional mall in the ’80s — they weren’t first-class operations.”
Ami Ziff, the head of national retail for Time Equities, said REAs are the first thing he looks at when evaluating an outdated mall to acquire and renovate. Signage, he said, can be a big sticking point with existing anchors.
“The anchors own the outside of your mall,” he said.
Many mall landlords pencil in a multimillion-dollar payment to the anchor tenant to resolve REA issues when redeveloping a property. [Bloomberg] – Rich Bockmann