I suspect a trick…

From Michael Laybourn

3/30/09 Ukiah, North California

With a tip of the fedora for Janie Sheppard
The big question is why would DDR want to change the zoning to build a mall these days? The economy tells us quite clearly that malls and shopping centers are not the way to go. Mall developers including DDR are all in serious financial trouble, as we can see here:

Friday March 27, 2009, 10:58 am EDT
NEW YORK (AP) — Fitch Ratings downgraded several ratings on Developers Diversified Realty Corp. on Friday, citing the shopping center developer’s liquidity position.

Fitch downgraded Developers Diversified’s issuer default rating, $1.3 billion in unsecured revolving credit facilities, $1.4 billion in unsecured medium-term notes and $833 million in unsecured convertible notes one notch to “BBB-” from “BBB.” The new rating is Fitch’s lowest investment-grade rating.

Fitch also downgraded $555 million in preferred stock to “BB+” from “BBB-,” sending it into non-investment grade, or “junk,” status. It assigned a negative outlook to the new ratings, implying another downgrade could be forthcoming. Fitch also said the company would have a liquidity shortfall of $300 million through the end of 2010 due to limited availability under the company’s revolving credit facilities and debts coming due in 2010. Last week, the company was removed from the Standard & Poor’s 500 Index due to a low market capitalization.

Holy smokes! Here is a company spiraling down to worthlessness that wants to spend a huge amount of money to convince voters to change the zoning for the Masonite property they bought to build a mall. This doesn’t seem to make any sense, just considering their own financial problems. In the past year DDR’s stock has plummeted from a high in 2007 of around $70 per share to a low of under $2 a share as of March, 2009. Nosing around a little bit more, we find that In December, 2008, another article noted that:

Mall culture in the United States — at least as we know it — is coming to an end.

LOS ANGELES (AP) — General Growth Properties Inc. , the second largest mall owner in the United States–whose stock trades for 55 cents, down from $44 last May, extended its plea for forbearance on more than $2 billion in debt, after the troubled mall operator failed to convince enough of its bondholders to give it more time to regain its financial footing by Monday’s deadline.

Just yesterday I read in Time magazine the same story:

The American mall is suffering a slow painful death… the international Council of Shopping Centers predicts that 73,000 stores will close their doors in the first half of 2009 and another group, The Strategic Resources Group, predict as many as 3000 shopping centers to close or go bankrupt this year.

And yet another source:

Georgia Tech professor Ellen Dunham-Jones, coauthor of the forthcoming book “Retrofitting Suburbia,” which focuses on the decline of malls and other commercial strips. Today, nearly a fifth of the country’s largest 2,000 regional malls are failing, she says, and according to the International Council of Shopping Centers, and a record 150,000 retail outlets, including such mall mainstays as the Gap and Foot Locker, will close this year.” [Newsweek]

“Curiouser and curiouser”. Why would this near bankrupt company want to spend a lot of cash to change the zoning? I doubt if they have a mall planned. Although we have seen titans of high finance topple because of stupid and risky moves, it would be utterly stupid to invest in a mall in these times, but I guess that it could be a possibility. But I would bet that there is another answer.

I suspect it is a trick. I doubt they will build a mall or are even thinking about it. They want to trick us into believing that they will be bringing money to the county with low paying jobs and some taxes with their “mall”. But… as we see above, this company needs cash badly and they need to change the zoning in order to get more money for the real estate.

The Zoning change here was a bad idea in the first place, but zoning change for an illusion is worse. Once you cover up Agricultural and Industrial land with houses and malls, you can’t get it back.


If the land isn’t valuable to DDR for retail, why would it be valuable as retail for another developer?

An answer to the comment about the DDR piece:
That is the mystery. My guesses are that retail property might be worth more than ag/industrial in any case and they seem to need cash. This company might also believe they are “too big to fail” and they certainly are big. They also might think that “these hicks” cannot make a company like us back off.
In any case, I believe that the present zoning is worth more to us in the county to have space for manufacturing and local agriculture, both of which create real wealth. Check out my update to the piece about Ukiah setting up a feed-in tariff system to promote solar for homeowners and small business.
If that did happen we might even get some solar manufacturers here.