Rocco Pirrotta – Weekly Market Update

Weekly Market Update – The Resurgence of Malls and Open-Air Shopping Centers

June 12, 2024

This week, I want to highlight a positive trend: the remarkable resurgence of malls nationwide.

The first mall in the United States opened in 1956, and within a decade, there were over 4,500 malls across the country. In recent years, malls faced significant challenges due to lockdowns and rising prices, leading to a considerable drop in foot traffic. However, shopping centers have demonstrated resilience. In 2021, visits to malls were between 10.7% and 15.3% lower than in 2019, but by 2023, this gap had narrowed to just 2.3%.

Despite consistent growth in foot traffic over the past two years, visits to malls still remain below 2019 levels. This begs the question: how can shopping centers attract more shoppers and fully recover their pre-COVID foot traffic?

Many malls are attracting visitors by expanding beyond traditional retail offerings, incorporating gyms, amusement parks, and entertainment complexes. With more traditional mall anchors closing their doors than ever before, even smaller shopping centers are adding lifestyle experience options in newly vacant spaces and integrating unique elements into conventional retail spaces.

A prime example of this innovation is the Chandler Fashion Center in Arizona. In September 2023, it opened a massive SCHEELS store within its mall. This 250,000-square-foot sporting goods store offers more than just merchandise; visitors can ride a 45-foot Ferris wheel or marvel at a 16,000-gallon saltwater aquarium. Monthly visitation data reveals the impact of this new retail destination, with foot traffic to the mall experiencing a significant increase from October 2023 onward. The excitement surrounding SCHEELS appears to be enduring, with February 2024 visits 23.3% higher than the same period in 2023.

Mall owners are also replacing traditional anchors with restaurants that draw foot traffic and create a collegial atmosphere. Although online shopping remains a major competitor, people inherently enjoy socializing and being with others.

The luxury retail segment has also thrived in recent years, and malls are capitalizing on this trend. Nearly 40% of new high-end store openings in 2023 were in mall settings, particularly in Sunbelt states like Texas, Florida, and Arizona. This surge is partially driven by an influx of wealthy newcomers to these states.

The resurgence of malls can be attributed to innovation. Mall owners did not remain idle as the retail landscape evolved pre- and post-COVID. They collaborated, researched, and developed solutions to adapt to the changing environment.

At Braun International and our sister companies, we promote dialogue and collaboration to find solutions tailored to your specific needs.

Explore the various ways Braun can assist you below. Visit our website or give us a call – we are here to help.

Case Studies

Case Study – Westfield Century City – A Blueprint for Operational and Financial Success in Modern Retail Development


Westfield Century City, located in the heart of Los Angeles, exemplifies the successful transformation and operation of a modern mall. This case study explores the financials, development strategies, and operational practices that have contributed to its sustained success.

Development and Financials

Initial Development and Investment

Westfield Century City underwent a significant redevelopment completed in 2017, representing one of Los Angeles’ largest investment projects. This $1 billion makeover aimed to reimagine the traditional shopping center as a central community hub and urban oasis, reflecting the Southern California lifestyle.

  • Investment Amount: $1 billion
  • Total Retail Space:3 million square feet
  • Anchor Tenants: Nordstrom, Bloomingdale’s, and Macy’s
  • Number of Stores: Over 200 retail stores

Revenue and Economic Impact

The redevelopment of Westfield Century City significantly boosted its economic impact on the local economy, generating substantial revenue from both retail sales and leasing.

  • Annual Revenue: Estimated at over $1 billion in retail sales
  • Job Creation: Over 10,000 jobs, including both construction and permanent positions

Design and Amenities

Westfield Century City is designed to offer a unique and engaging shopping experience. The open-air garden retreat, envisioned by URW Design, acclaimed taste-maker Kelly Wearstler, landscape architect OJB, and executive architects at Gensler, provides a distinctive and authentic Los Angeles escape.

  • Design Features: Open-air plazas, rooftop gardens, and high-end finishes
  • Dining Options: Over 50 dining establishments, including Eataly and a range of fast-casual to fine dining options
  • Entertainment: State-of-the-art AMC multiplex, fitness centers, children’s play areas, and spaces for live performances and exhibitions

Strategies for Sustaining Foot Traffic

Westfield Century City employs several strategies to maintain high foot traffic and shopper engagement.

  1. Diverse Tenant Mix: The mall offers a variety of luxury brands, popular retailers, and unique boutiques, catering to a wide range of shoppers.
  2. Events and Experiences: Regular events, such as fashion shows, seasonal festivals, and family-friendly activities, keep the mall lively and attract repeat visitors.
  3. Digital Integration: The mall leverages technology to enhance the shopping experience, including a mobile app for easy navigation, online booking for restaurants and events, and interactive digital directories.
  4. Customer Service: Offering personal shopping assistants, concierge services, and valet parking ensures a premium shopping experience.
  5. Health and Wellness Amenities: The mall includes health and wellness features such as fitness centers and open spaces designed to reflect the lifestyle of its customers.

Performance Metrics

Since its redevelopment, Westfield Century City has shown impressive performance metrics that underscore its success.

  • Foot Traffic: Averaging over 20 million visitors annually
  • Retail Sales Per Square Foot: Approximately $1,200, significantly higher than the industry average
  • Occupancy Rate: Consistently above 95%, indicating high demand for retail space within the mall

Loan Information and Financial Viability

The $1 billion redevelopment of Westfield Century City was financed through a combination of equity and debt financing, showcasing the confidence lenders have in high-quality retail developments. The financial structuring of the deal included both traditional loans and creative financing solutions to optimize cash flow and ensure project viability.

  • Debt Financing: The redevelopment was supported by a $750 million loan from a consortium of leading financial institutions, including Wells Fargo, JP Morgan Chase, and Bank of America. The loan was structured with favorable terms, reflecting the strong creditworthiness of the Westfield Group and the anticipated high return on investment.
  • Equity Contribution: Westfield Group provided $250 million in equity to cover the remaining costs of the redevelopment. This equity stake underscored the developer’s commitment and belief in the project’s success.
  • Loan Structure: The financing deal included a mix of fixed and variable interest rates, with a portion of the loan set up as a revolving credit facility to manage cash flow during the redevelopment phase. Additionally, the loan terms included performance-based incentives, allowing for interest rate reductions based on meeting specific milestones related to foot traffic and retail sales.

The successful execution and financial performance of Westfield Century City provide a compelling case for investment in large-scale retail projects. The strategic structuring of the loan ensured that the project had the necessary financial backing while maintaining flexibility to adapt to market conditions.


Westfield Century City’s success can be attributed to strategic investment, innovative design, and a commitment to providing a diverse and engaging shopping experience. By continuously evolving and adapting to consumer trends, Westfield Century City remains a vibrant and profitable retail destination in Los Angeles.


Rocco Pirrotta – Weekly Market Update

Invitation to Educational Events: Accelerated Insights for Financial Institutions

June 4, 2024

I hope all of you have been enjoying the new format of our weekly updates. Our goal is to provide informative and insightful content on the issues financial institutions face during these exciting times. To continue our tradition of supporting financial institutions, Braun International is organizing educational Zoom or in-person events tailored to your specific needs. These presentations are free of charge and aim to address the unique challenges you encounter.

In my conversations with banks and other financial institutions, I’ve noticed many young professionals entering the field. While youth represents the future, the lack of practical, hands-on experience is becoming increasingly evident. Many banks have phased out in-house training programs, leaving senior management and department heads overwhelmed with market uncertainties and maintaining profitability.

Adding to this, the pre-pandemic market strength, low interest rates, and historically low delinquency rates have created a knowledge gap, especially in Special Asset Groups. These teams have had little to no real-life experience in the seven to nine years leading up to the pandemic. The pandemic itself introduced different rules, with PPP loans and other government funds temporarily supporting a weakening market.

We want to share our insights and years of experience in the financial markets with you and your staff. Our presentations will focus on the topics most important to you, such as:

  • When is it prudent to foreclose rather than continue to work with the borrower?
  • When should we look to sell notes?
  • What different ways are available to sell notes? (Auction, brokered sale, or one-off sales)
  • What is the difference between Judicial and Non-Judicial foreclosure?
  • Should we seek the appointment of a receiver?
  • In a workout situation, what type of appraisal should you order? (As-is, liquidation value, or forced liquidation value)

These are just a few areas we can cover for you and your team. We offer this service free of charge with the mission to educate and help you develop best practices tailored to your institution’s size, capital level, and mission statement. We will coordinate with your department heads and senior management to customize our presentation to your needs.

Our presenters include Todd Wohl, our Senior Partner, myself, and, if necessary or requested, an attorney specializing in the issues you want us to cover.

Please contact me to arrange times and dates that are most convenient for you and your staff.

I have included a couple of case studies below to illustrate different problem-solving approaches. We hope our presentation will provide clarity on the best direction for your institution.

I look forward to hearing from you.

Case Studies

Case Study – Effective Strategies for Handling Property Loan Defaults – Hotel Auction Success

Background: A borrower defaulted on their loan, so the lender assumed ownership of a 120-room hotel property. The removal of the hotel’s flag significantly impacted its market value and attractiveness to potential buyers. Faced with the need to sell the property quickly, the lender turned to Braun for assistance in appraising and auctioning the hotel within a three-month timeframe.

Current State of the Lending Market for Hotels: The hotel investment landscape in 2024 is marked by cautious optimism amid a shifting lending environment. Industry reports indicate an uptick in hotel debt originations, driven by a record volume of maturing loans and the need for capital deployment. Lenders, particularly private credit institutions like Peachtree Group, are stepping in to fill the void left by traditional banks, which are retreating from commercial real estate. The securitization market is also showing signs of improvement, providing additional avenues for financing. Despite these positive indicators, the lending environment remains challenging, with high interest rates and stringent lending criteria affecting the availability and cost of capital. Investors are seeing opportunities in refinancing and acquisitions, especially for properties with strong operational performance and cash flow.

From an investor perspective, the current state of hotel financing reflects a complex interplay of market dynamics and economic factors. Debt originations are expected to increase as lenders adjust their strategies to accommodate the unique needs of the hotel sector. However, the high cost of capital and ongoing instability in regional banks pose significant hurdles. Investors highlight the shift towards non-traditional lenders and the critical role of private credit in sustaining the market. As interest rates are anticipated to stabilize or decline slightly towards the latter half of the year, refinancing activity is likely to gain momentum, albeit with a focus on assets demonstrating robust financial health. The overall sentiment among hotel investors is one of cautious engagement, balancing the opportunities presented by a recovering market with the inherent risks of an uncertain economic landscape.

Braun’s Approach:

Appraisal: Braun conducted a forced liquidation value analysis to determine the property’s worth under current market conditions. This appraisal provided a realistic baseline for the auction process.

  • Understanding Forced Liquidation Value: Forced liquidation value (FLV) is a property’s estimated price under a quick-sale condition, which, in some cases, is lower than its market value. This valuation type is critical when assets need to be sold promptly due to financial distress. FLV helps lenders and stakeholders understand the minimum expected return from a rapid sale, enabling better decision-making in distressed scenarios.

Auction Strategy: Braun was engaged by the receiver to manage the auction and sales process. A dual-method auction was selected, combining a live auction with an online component. This approach included:

  • Qualified Round: An initial round to vet and qualify buyers, ensuring serious and capable bidders.
  • Highest Best Round: A final round where the highest and best offers were solicited from the qualified buyers.

Why Auction?

  • Short Timeframe: Auctions are ideal for achieving quick sales, which is crucial in distressed asset situations.
  • Reduced Carrying Costs: A rapid sale minimizes the lender’s ongoing maintenance and holding costs.
  • International Buyer Pool: The auction attracted bidders from three different countries, increasing competition and the potential sale price.

Auction Execution: Twelve qualified buyers participated in the auction. The highest bid was 9% higher than the second-highest bid, demonstrating competitive interest. The sale was entirely non-contingent, with bidders completing all due diligence before placing their bids.

Results: The auction resulted in a sale price 14% higher than the appraised forced liquidation value. The buyer closed escrow within 30 days, meeting the lender’s tight timeline and reducing further holding costs.

Conclusion: Braun’s strategic approach to appraising and auctioning distressed hotel property exemplifies effective handling of property loan defaults. By conducting a thorough forced liquidation value analysis and leveraging an international buyer pool and sales platform, Braun achieved exceptional results. This case study is a valuable example for bankers, lenders, finance professionals, and attorneys, illustrating the benefits of strategic auctions and timely asset liquidation in the current lending environment.


Rocco Pirrotta – Weekly Market Update

May 29, 2024

I recently attended an RMA seminar discussing the Complexities of California’s Real Estate Market. The panel included a banker, a developer, an office and industrial tenant advocate, and a lawyer. It sounds like the start of a joke, but the discussion was both lively and insightful.

One phrase I picked up was “Interest Rate Purgatory,” which perfectly captures the current rate environment. We all anticipated rate cuts from the Fed by now, possibly even two, with the promise of more before year-end. However, we’ve seen none, and the likelihood of a reduction this year seems slimmer than ever. This raises the question: is this higher rate environment the new normal, and how do we adapt?

Prime rates peaked at around 21% in the early ’80s, but from 1983 through the ’90s, they hovered between 12.5% and 5.5%. Despite the challenges of the late ’80s and early ’90s, mainly due to the S&L crisis and the defense industry’s departure from Southern California, it was generally a time of economic prosperity. We learned to thrive in a higher interest-rate environment then, and we may need to do so again.

Many panelists and audience members believe that we may be returning to such an environment. The 2.5-3.5% prime rates from 2010 to 2020 spoiled us, but the rate hikes since 2022 remind us that those low rates were not the norm.

In the post-pandemic CRE world, we’ve heard horror stories of trophy office buildings trading hands for a fraction of their original investment. However, suburban office spaces in California are holding their own, even as CBD office spaces struggle. Law firms, banks, and insurance companies continue to occupy significant CBD spaces, and many employers require employees to return to the office, which is evident in the increasing traffic.

The industrial market remains strong, and while the multi-family sector shows some softness, it appears stable overall. However, vigilance is crucial.

Given the complexity of the current real estate market, the key to navigating these challenges is through collaboration. It’s often daunting to chart the right course of action, particularly in unique situations. In these changing times, the value of consulting experienced professionals, who can provide guidance and support, cannot be overstated.

At Braun International, we can assist you. With over 3,800 associates nationwide, a century of helping financial markets, and expertise across various financial institution issues, we have the experience to increase your profits, minimize losses, and help you find the right solutions for your specific challenges.

Case Studies

Case Study – Addressing the Crisis of Empty Office Buildings in Downtown Los Angeles

The Situation

Downtown Los Angeles is currently facing a significant challenge with empty high-rise office buildings, particularly the abandoned luxury apartment towers near 11th and Figueroa streets. These buildings initially meant to rejuvenate the area, have become notorious for illegal activities and social media spectacles. Abandoned since 2019, the towers now attract graffiti artists, thrill-seekers, and tourists, leading to increased crime and substantial law enforcement costs.

What Went Wrong

The crisis began when the Chinese developer, Oceanwide Holdings, halted construction in 2019 due to financial difficulties. The project, once a symbol of downtown LA’s resurgence, quickly became a hotspot for graffiti and dangerous stunts like base jumping. Despite increased police patrols, the vandalism persisted, leading to nearly 30 arrests and costing the city thousands of dollars in law enforcement resources.

Efforts to hold the developer accountable for cleanup and security have failed, leaving the city to bear the burden. Real estate developer Rick Caruso noted the financial impracticality of completing the project, estimating that finishing the towers would cost over $1 billion, far exceeding their potential market value.

Current Impact

The situation highlights broader issues within LA’s real estate market. Office vacancy rates in Los Angeles County are around 22%, with downtown vacancies near 28%. These high vacancy rates contribute to lost economic potential and strain city resources, as seen with the continued problems at the abandoned towers.


To address this crisis, we recommend auctioning off the property. An auction can attract a diverse pool of potential buyers with innovative ideas for repurposing the buildings. Given the current economic climate and the challenges of completing the original project, an auction provides a transparent and efficient means of transferring ownership to an entity capable of investing in the property’s future.

Proposed Solutions

  1. Auctioning the Property:
  • Transparency: Ensures a fair and open process, potentially attracting both local and international investors.
  • Efficiency: Quick transfer of ownership can expedite redevelopment plans, reducing the period the buildings remain a public nuisance.
  1. Repurposing the Buildings:
  • Workforce Housing: Convert the towers into affordable residential units for essential workers such as teachers, firefighters, and police officers. This not only addresses the housing crisis but also supports the local economy by providing housing close to workplaces.
  • Mixed-Use Development: Develop a mixed-use space combining residential units, retail spaces, and community services to create a vibrant, self-sustaining neighborhood.
  1. Partnerships and Funding:
  • Government Collaboration: Partner with federal and state governments to secure funding for redevelopment projects, particularly those aimed at creating affordable housing.
  • Public-Private Partnerships: Engage private developers and investors in public-private partnerships to share the risks and benefits of redevelopment.

By implementing these recommendations, Los Angeles can transform a problematic eyesore into a valuable asset, revitalizing downtown and setting a precedent for addressing similar challenges in the future.


Rocco Pirrotta – Weekly Market Update

May 20, 2024

As we close out the month of April, the Fed has not yet reduced rates and the timing of rate reductions remains murky at best. I have spent a lot of time talking with and meeting bankers and other financial professionals and wanted to share my impressions. This is by no means a statistically accurate or controlled survey, but simply, my impressions of what is happening based on my interactions with many of you.

  • Many banks remain on the sideline as far as new lending. Especially on CRE.
  • Banks seem to be taking advantage of the Regulators relaxed TDR rules and extending existing loans under terms and conditions that in the past may have forced TDR classification.
  • While there is a definite uptick in delinquencies both CRE and ABL, the situation still appears manageable.
  • Construction loans seem to be the outlier, with many banks looking for good positive and seasoned borrowers to lend to. A lot of this is multi-family construction but owner user industrial and even some pre-leased investor projects are moving forward.

So, what’s the outlook for the rest of this year and 2025?

  • Banks appear to have made a strategic decision to keep underwriters and loan analysts despite much slower loan production. ( Keeping experienced teams together will pay future dividends.)
  • Banks are utilizing employees who used to help fund new loans to now examine their existing portfolios and do a deep dive to identify possible distressed, or soon to be distressed loans.
  • Everyone is waiting for “normalcy” in lending to return and hoping we don’t have another 2008-2010 downturn in our future. (I still don’t think it will be that bad.)

In times like these where banks are utilizing sometimes inexperienced employees to defer sending loans to Special Assets it is important that managers and team heads reach out to get insights and advice from seasoned veterans. Braun International with over 100 years of experience offering help to financial institutions and our seasoned staff of professionals is here to help. Call or email us and allow us to talk to your staff via zoom, conference calls or in person. We have expertise in many areas. Visit our website and determine for yourselves how we can best be of assistance to your organization.

As I mentioned above, these are my impressions. I would welcome your thoughts whether you agree or disagree. That is how we develop “Best Practices”.

Case Studies

Case Study – Lender Non-Performing Note Auction

A regional bank faced the challenge of managing non-performing notes associated with a gas station and hotel. Rather than assuming ownership of these distressed assets through Foreclosure, Trustee Sale, and ultimately OREO (Other Real Estate Owned) or appointing a receiver, the bank opted for a strategic approach of selling the notes early in the foreclosure process. To facilitate this, the bank engaged BRAUN, a reputable 100-year-old firm specializing in restructuring and asset disposition services.

Case Study – Industrial Building

Established Brokerage Company in Birmingham, Alabama has a listing of a Industrial Building formerly used as a food processing/baking facility. The building required some capital improvements for code violations and general repair. The building was on the market for well over a year with little buyer interest. The Brokerage Company partnered with BRAUN to Auction the building. BRAUN implemented a 60-day accelerated Marketing & Advertising campaign at no cost to the Broker. Buyers conducted their due diligence in advance of the auction, with typical property information (Phase One, inspection report, past appraisal) provided by Seller. Buyers were pre-qualified and were provided with a 45-day closing period with the opportunity to obtain financing, without this being a contingency of closing. BRAUN received over 251 inquiries which resulted in over 20 showings and 9 bidders. The building was auctioned in a live on site format in conjunction with proxy and telephonic bidding. The building sold for 12% above appraised value. The Seller paid zero commissions on the sale, the buyer paid the Broker, BRAUN and the Buyer’s Broker.

Case Study – Industrial Building

A Trustee of an Estate was tasked with closing a manufacturing company, selling the real estate, business assets of equipment and inventory of the manufacturing company. The Industrial building was never listed, and the business assets were valued at $2 million dollars. The building was appraised at $88 PSF. The BRAUN team proposed to sell all of the assets at auction. BRAUN’s Business Asset Group prepared the machinery and equipment for auction in conjunction with the preparation of the building. The auction of the building was conducted simultaneously with the auction of the Machinery & Inventory. A buyer provided an offer for the building prior to the auction day ( this buyer was sourced due to their interest in the equipment and inventory). At the request of the Trustee, BRAUN negotiated the terms of sale and a non-refundable deposit prior to auction day. BRAUN collected backup buyers on auction day with the right for continued bidding if the buyer did not close. The buyer closed and the building was sold for $108 PSF. The Machinery and Inventory was auctioned and the building closed in 43 days.

Case Study – Baymont & Howard Johnson Hotel

A Regional Bank appoints a Receiver to manage two operating hotels. The Bank engages BRAUN to sell the hotels via BRAUN’s WorldBid Auction Program on behalf of the Receiver. BRAUN and the Receiver collect relevant financial information, Franchisor sale approvals and relevant property history diligence materials. Each Bidder provided to BRAUN an executed Confidentiality Agreement prior to review. BRAUN marketed and advertised the notes to buyers via its Accelerated Marketing Program locally, regionally, nationally and internationally. Buyers were provided 60 days to complete their diligence. Since the hotels were operating during the marketing campaign and BRAUN did not want to interfere with hotel operations, therefore, BRAUN used its Online, Proxy and Live Telephonic bidding platform for the prequalified bidders. The hotels were sold sequentially on the same day to maximize the Marketing Campaign and buyer interest. A key footnote regarding the sale of the second hotel and how well auctions create the “bidding frenzy,”  because a buyer who was overbid on the first hotel auctioned, decided to bid on the second hotel knowing full well they never reviewed the financial information and inspected the hotel. They decided to bid nonetheless and subsequently overbid the other 4 bidders and WON! This buyer acknowledged to BRAUN after the auction that they were so disappointed because they did not win the first hotel, they were determined to buy the second, no matter that they conducted NO DILIGENCE of the second hotel. An astonishing and unbelievable fact. The lender achieved a sale of 79% of the note value on the first Hotel and 86% on the second hotel. The lender saved nearly $160,000 in operating costs by using BRAUN’s WorldBid Platform to sell the notes.