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Malls Go for Broke, May Still Go Broke


Retailers, commercial real estate faltering.

As retailers batten down the hatches for what most finally agree will be a nasty economic slowdown, their landlords are scrambling to keep the lights on.

The Wall Street Journal reports mall and shopping-center owners are turning to unconventional advertising methods to keep cash coming in the door. Ads are popping up on food-court meal trays, parking-lot stalls and even vacant storefronts.

InWindow and WindowGain, 2 new companies in the alternative ad space, have landed big names on their clients' previously vacuous retail space: Comcast (CMCSA), SAB Miller and Verizon (VZ) are all signed up.

Although cash flow from these new avenues pales in comparison to traditional rental income, it's better than nothing. Owners, however, are reluctant to lock in such ads for long periods of time; instead; they're hoping new tenants will somehow turn up.

In addition to buoying bottom lines, storefront ads help make malls feel less empty. "For lease" signs and empty windows don't exactly make for a happy shopping experience. And consumers waffling over how to spend their dwindling discretionary dollars can't be constantly reminded of how bad things are - it isn't exactly good for business.

Big mall owners like General Growth Properties (GGP) and Boston Properties (BXP) are hoping the extra income will help cover mounting credit costs. Meanwhile, investors are fleeing equity of these and other publicly traded Real Estate Investment Trusts, or REITs, on fears they could default on their debt obligations. GGP trades at just above $3, down from more than $50 at this time last year. BXP has fared slightly better, taking a mere 35% haircut from over $100 to $65 now.
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No positions in stocks mentioned.

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