Specialty Retailers Buoy General Growth

"The mood of our retail partners is optimistic," says Michaels, rattling off a list of specialty chains that have been adding stores in the face of economic uncertainty.

Even JC Penney, which was a question mark for some retail experts a year ago when Montgomery Ward led a string of bankruptcy filings, appears to be rebounding, Michaels says. "I think the team they've put together there is focused," Michaels says. "We're liking what we see."

The calmer waters have not righted all boats, Michaels concedes. "It goes without saying the Gap is doing less well," he says. "They probably lead the list of concerns that we have and all mall owners have."

Department stores also are lagging, especially when compared to their smaller specialty competitors, Michaels says.

"I attribute that to the fact that specialty stores are more nimble," he explains. "They can react quicker and give the customer what they want."

General Growth Properties' 125-million-sf portfolio was 89.1%-occupied in the first quarter, about even with the same period in 2001. However, tenants signing new or renewing leases are paying $34.99 per sf, about 3% higher than a year ago, the REIT reports.

However, a year after the sector dealt with a rash of bankruptcies, few retailers are asking to terminate their leases with General Growth Properties, or restructure them, Michaels says. "There's always some retailers who want to exit particular properties," he adds.

When that happens, Michaels says, it often proves to be positive for his REIT as it collects a termination and re-leases the spaces.