On Travel With Grant, his friend Nigel posted a PSA (public service announcement) about Macerich gift cards being coded as cash advances, including a purchase at Jamba Juice. I’m not sure if you know, but many tenants in big mall REITs (real estate investment trusts) share their sales with the property owners. Anchor tenants, the big box retailers typically own the property and don’t share any profits with the property owners as those are the stores that drive the traffic to the malls. The linked Wall Street Journal article focuses on high tech stores like Tesla and Apple are driving up the dollars per square footage up and they are able to get better lease agreements because the anchor tenants are not as relevant today than in years past.
“They do very high volumes,” said Peter Lowy, co-chief executive of Westfield Corp., of the high-tech tenants. Westfield has 16 Apple stores, six Tesla locations and six Microsoft stores in its 38 U.S. malls. ”Your company’s sales per square foot are really boosted by those tenants.”
General Growth Properties Inc., the nation’s second-largest mall operator, said Apple’s rollout of the iPhone 6 was a main driver of its 6.7% increase in September monthly sales. Without Apple, sales would have risen only 4%, Chief Executive Sandeep Mathrani told analysts in October.
Some traditional mall anchors like J.C. Penney Co. and Sears Holdings Inc. are in a prolonged slump. J.C. Penney suffered a per-square-foot sales decline of 30% from 2010 to 2013, the most recent year for which data are available, according to investment bank Imperial Capital. Sears doesn’t report average sales per square foot, but sales at stores open at least a year have fallen by a cumulative 12.1% since 2010, according to investment bank Evercore ISI.
The new tenants tend to be far more profitable for malls than anchor stores because, under typical lease agreements, they are required to share a percentage of their sales with their landlords.
That being said, what I didn’t know based off of Nigel’s experience (and others from the comments) were the stores had Macerich process the credit card transactions. This explains why even a purchase at Jamba juice caused a cash advance. My assumption is that being a tenant, the lease agreement has the property owner process the credit card sales and will hold the funds in escrow then pass it along to the retailers after the sales process.
“As department stores close, Apple is replacing them as the main driver of traffic to the mall,” said Raymond Cirz, chairman of Integra Realty Resources, a real-estate valuation and consulting firm.
Apple doesn’t get the same terms as anchor tenants, because those stores still do a better job of getting shoppers to fan out to other retailers in the mall.
“There are a lot of people who go to Apple and leave,” said DJ Busch, a senior analyst at Green Street. “Apple doesn’t promote cross shopping as much as healthy department stores do.”
Apple’s strong sales mean the company pays a lot of rent in outright terms. But Apple enjoys breaks in addition to paying a low percentage of sales. Landlords typically require tenants to pay additional rent if their sales exceed a preset trigger, for example, but Apple doesn’t pay this extra amount, the industry executives said.
UPDATE: I have to update this post as I had misinterpreted the Jamba Juice gift card purchase. That gift card was purchased at the desk where the Macerich gift cards were puchased.
@Saverocity the cash advance is when you buy Jamba Juice GCs from the Macerich mall, not from Jamba Juice itself
— Grant Thomas (@travelwithgrant) May 10, 2015
The two WSJ articles are still worth a read!
