Entrepreneurs

How one man turned $20K into mall industry success

Sandeep Mathrani was designing wastewater treatment plants when he realized he had a knack for real estate.

It was 1986, and with the help of a $52,000 FHA loan, $300 in borrowings from his Visa, and the $1,900 he pocketed by selling his Nissan Sentra and swapping it for a VW Rabbit Diesel, the recent master's graduate purchased his Washington, D.C., apartment for $55,000.

Some 12 to 18 months later, he sold it for for $75,000.

"I made $20,000. That's a lot of money when you're making $25,000," Mathrani said. "So I said, 'This real estate stuff's pretty good.'"

Sandeep Mathrani, CEO of General Growth Properties.
Source: General Growth Properties
Sandeep Mathrani, CEO of General Growth Properties.

Now CEO of General Growth Properties, the second-largest mall portfolio owner in the United States, Mathrani has proven that if your instincts are sharp enough, it doesn't matter where your roots lie. Case in point: His first few months as the company's chief. It was 2010, and a judge had just approved a plan for GGP to exit Chapter 11.

"I knew nothing about the company," Mathrani admitted. He was hired away from the retail division at Vornado Realty Trust, where he served as president for eight years.

Yet on a road show to take the mall operator out of bankruptcy, he raised $2.3 billion. Mathrani then recapitalized the company with an additional $6.8 billion in equity, which he humbly chalks up to an adrenaline rush.

Others in the industry are more open about his prowess. Tom McGee, who was appointed president of the International Council of Shopping Centers trade group in August, said that while he's only known Mathrani a few months, "it was easy to see almost instantaneously what's made him so successful in our industry — passion and intellect."

The two work together at ICSC, where Mathrani is a trustee.

Dan Hurwitz, the former CEO of DDR who has known Mathrani for some 15 years, described him as a "charismatic leader" and an "extraordinary forward thinker." Hurwitz, who is now CEO of Raider Hill Advisors, is on GGP's board.

Some 25 years ago, Mathrani displayed this forward thinking when he grasped that the United States had too much shopping space per capita — a problem that only got worse during a period of overbuilding in the 2000s, and is now widely recognized. As shopping centers continued to saturate the country, causing many to fold into obsolescence, Mathrani said it was better to own fewer, high-quality properties in the right places. This is a strategy he employed long before going to GGP.

"You sort of sit back and say 'OK, if there are 1,100 malls in the country, where do I see this industry going long term?'" he said. "If that number is 800, then what percentage of that 800 do you want to own? So it became fairly straightforward to me that the better malls would continue to do better and the lower-quality malls over time would continue to deteriorate."

It's that same attitude that's shaped Mathrani's road map at GGP. In 2012, the company spun off 30 so-called B malls into a separate company. Though "B" malls are far from the destitute centers that grab headlines, Mathrani has made it well-known he wants to own only the country's best centers. Since that spinoff, GGP has sold off roughly 30 more properties, and now has a total near 120. Long term, Mathrani said he sees the company owning somewhere between 105 and 110 malls.

"We see what's happening to the top 500, 600 malls in the country. They're just thriving," he said, explaining that demand for space is at an all-time high, and sales continue to climb. "What I want to be is the owner of 100, 105 of the top 400 to 450 malls in the country," he said.

Investing in the company's crown jewels has reaped benefits for GGP. Back in the late '90s, the company purchased Hawaii's Ala Moana Center for about $900 million. At the time, Mathrani said, that price was "out of the stratosphere." But thanks to continued investments into the property, when the company sold off a 25 percent stake in the center last year, it was valued at about $5.5 billion.

The company's results illustrate the dichotomy happening in bricks-and-mortar retail: As subpar malls fall by the wayside, top-tier properties are only getting stronger. Yet with so many people bashing the mall industry, Mathrani has some advice for how to drown out the noise.

"Keep your head down and keep working," he said. "Numbers prove themselves."