I know how this all started.
In recent days, Dallasites have been abuzz with rumors that the Galleria Dallas is shutting down after the Dallas Morning News reported—via Steve Brown—that the deed to the three-level mall and Westin Hotel was taken over by an investment unit of Metropolitan Life Insurance. It sounded almost like a foreclosure. MetLife held over $315 million in loans on the Galleria dating back to 2014.
In the article’s following paragraphs, the News cited financial woes at the now-defunct Vista Ridge mall in Arlington and others as examples of the struggles brick-and-mortar shopping centers have been battling for years.
Say goodbye to the Galleria’s signature lighted red trees during the holidays?? Posting teary memes and wistful memories on their Facebook pages, denizens lamented the news that the Galleria had changed hands. But maybe they were reading a little too fast because the article never outright said it was shutting down.
What’s Happening at the Galleria Dallas?
Yes, there will be some changes at the Dallas Galleria (not to be confused with the Houston Galleria), the 1.4 million-square-foot shopping mall located at the Dallas North Tollway and LBJ Freeway, and the mall may end up being smaller than its current size, but it is not going away.
The Galleria, including the Westin, had been owned by a partnership represented by UBS Realty Investors since 2002 and reportedly bought the 400-plus-room Westin Hotel in 2005, spending a total of $395 million ($300 million plus $95 million for the hotel) for both properties.
According to Steve, the mall and hotel were most recently valued at just over $200 million. So yeah, either a little overpayment there or the area is losing real estate value.
But here’s the source.
A Trademark Redevelopment Plan
In October 2022, Terry Montesi, chairman and CEO of Fort-Worth-based Trademark Property Company, spoke at the National Association of Real Estate Editor’s Atlanta conference. The panel was on commercial real estate and what to do with shopping malls. Montesi offered up that Trademark would be working with the Galleria owners on a redevelopment plan, which would include demolishing about a fifth of the mall to make way for a new live-work-play-stay development.
The panelist’s quote: “Take down 20 percent of the mall, add a multifamily tower, an office tower, a boutique hotel, and public space,” Montesi said. “That’s what people want now — mixed-use.”
Naturally, all Dallas-based ears perked up. Steve Brown ran right up to Montesi after the panel, then filed this Oct. 12, 2022 story.
But now Trademark won’t be working with UBS, but rather the real estate asset management arm of an insurance company. A lot of business news to digest there as well as unanswered questions, but readers quickly took to Facebook to discuss their take on the article. Soon a game of telephone morphed into the rumor that the Galleria was closing, which took hold on social media.
This prompted a statement from Galleria Dallas General Manager Angie Freed:
“Galleria Dallas is not closing,” Freed said. “While the addition of multi-residential development to Galleria Dallas has been considered as one component of a potential long-term redevelopment project, the mall, along with its retail, dining, and experiential entertainment features, is and will be the core of this Dallas destination.”
It’s Still an Uphill Battle for the Galleria
Yes, experts agree that malls have their challenges and the Galleria is no exception.
“The shopping experience the consumer is looking for has continued to evolve,” Steve Lieberman, CEO of Dallas-based The Retail Connection said to the Morning News. “That requires a reconfiguration for these large mall properties.”
First, it was e-commerce, then it was COVID-19 that hammered this real estate sector. To adapt, retail centers like the Galleria need strong communities around them and a reason for consumers to stop in and spend money.
The community is here, and maybe this is proof that Dallasites are still engaged in the Galleria with its ice skating rink and tallest Christmas tree in Texas at 95 feet tall.
But many stores have either moved or reduced footprints at the Galleria. When the shopping mall opened in 1983, the Galleria was anchored by Saks Fifth Avenue, a New York-based retailer, and Marshall Field & Company, a defunct Chicago-based retailer near and dear to my heart — and neither one remains today.
Belk Department Store took up residence in the old Marshall Field years later, but it, too, closed in 2020. The triple deck of Banana Republic, Gap, and Old Navy snapped up Saks Fifth Avenue’s real estate, when Saks left in 2013, taking with it Dallas’s very last Saks location. Now the only anchors left are the stalwart Macy’s, opened in 1985 and Nordstrom, which opened in 1996. And even Nordstroms recently closed its third-floor level at Galleria. (Here’s what’s at Galleria now.)
Here’s My Take
I started thinking, hmm, how will this affect housing in the Galleria area or nearby? And what about Midtown? The Valley View/Midtown part of North Dallas has been a mess for years, with bickering between the city, developers, and owners. It’s an eyesore that is the bane of every nearby homeowner’s existence.
But as you move closer to the Galleria, there is a lot of new development and energy along Alpha Road. Mike Ablon has been building luxury apartments in the area and he told me in October the occupancy in those units is solidly high.
Current Galleria occupancy is below 90, which is not sustainable, and the mall needs security. But Lieberman, the Dallas retail expert, said challenges bring opportunity.
“These challenges are going to lead to new opportunities and we will end up with better shopping environments.”
Hopefully.
