Lender takes over ownership of Dallas’ landmark Galleria mall

Ownership of the landmark Galleria Dallas mall – one of North Texas’ best known shopping meccas – has been transferred to the property’s lenders just days before Christmas.

A unit of Metropolitan Life Insurance has taken over the deed to the 40-year-old regional shopping mall at LBJ Freeway and Dallas Parkway. MetLife also took the deed to the 432-room Westin Galleria Hotel.

The 1.9 million-square-foot, three-level shopping mall had been owned by a partnership represented by UBS Realty Investors since 2002. UBS bought the high-rise hotel in 2005.

“Galleria Dallas and Westin Galleria Hotel are high-quality assets that are well-positioned in the Dallas market,” Dave Franecki, spokesman for MetLife Investment Management, one of the country’s largest operators and mortgage holders for commercial property said in an email. “While we cannot comment on the specifics of this transaction, MetLife Investment Management has a proven track record in institutional real estate and a dedicated team in the Dallas area.”

MetLife held more than $315 million in loans on the Galleria dating back to 2014. Country records show that UBS Realty reached an agreement to hand over the mall and hotel to MetLife.

The transaction does not include the Galleria’s adjoining office buildings, which are under separate ownership.

When global investor UBS acquired the mall 20 years ago, it was one of the most successful shopping centers in the country. It remains a local favorite of holiday shoppers with its centerpiece ice skating rink and what is touted as the country’s tallest indoor Christmas tree.

UBS paid about $300 million for the mall and spent about $95 million to buy the Westin hotel.

But since then, the shopping center – like many other regional malls – has lost department stores and has seen sales slip with the growth of online retailing.

The mall and hotel most recently were valued for property taxes at just over $200 million.

Galleria’s owners have been working with Fort Worth-based Trademark Property Co. on a potential redevelopment plan that would add apartments, more hotel rooms and offices. Trademark Property is listed as the manager with the new MetLife ownership.

“Galleria Dallas is a premier destination for shopping, dining and entertainment at one of the best locations in the U.S.,” Trademark CEO Terry Montesi said in a statement. “We look forward to working with MetLife Investment Management on this landmark asset.”

The Galleria is just the latest North Texas mall to be transferred to lender control. Willow Bend in Plano and Vista Ridge in Lewisville were taken over by lenders that resold the properties at a loss to new owners.

Plano’s Collin Creek Mall also was put in lenders’ hands before being bought by developers that have torn down most of the shopping center for new development.

Robert Young, executive managing director at Dallas-based retail real estate firm Weitzman, said the change in ownership at the Galleria is an indication of the challenges big shopping malls face.

“That’s been going on with a lot of properties in the mall category for a long time,” he said, noting that malls have some of the highest vacancy rates among local retail centers.

“Today, the mall occupancy is below 90% vs. a market that is almost 94% for everything else,” Young said.

The weakest local malls have more than a 30% vacancy, according to Weitzman’s latest estimates.

That’s why many of North Texas’ shopping malls – including Redbird in southwest Dallas – are launching redevelopments.

“Can malls be repositioned? In some cases, the answer is absolutely yes,” Young said.

The former Belk Department Store at the Galleria has been empty since the retailer pulled out of the mall in 2020. The three-story building originally housed a Marshall Field & Co. store. Nordstrom recently closed its third level at its Galleria store, which opened in 1996.

Other large storefronts are shuttered at the Galleria – particularly on the third level.

The mall has anchors Nordstrom and Macy’s, Zara, H&M, Forever 21, Apple and the only American Girl store in North Texas. As Gap Inc. closed stores, it kept a triple deck of its brands on the south side of the mall with Banana Republic, Gap and Old Navy.

Several mall tenants said they don’t expect the ownership change to affect their operations.

Ray Washburne, owner of the Mi Cocina restaurant chain, said his company’s Galleria location is successful. It opened in 1997.

”The Galleria still has a regional draw and we’ve been successful there. They’ve done a good job of bringing traffic to us,” said Washburne, who described the Galleria as a Main Street for North Dallas where families often spend the day.

Leslie Matney, owner of Gregory’s, a men’s and women’s luxury apparel, shoes and accessories boutique, moved her store back to the Galleria in April. Gregory’s had been at rival NorthPark Center for 12 years, and before that, at the Galleria for 20 years.

“We’re thrilled to be back. We’ve been very well received by clients from the northern suburbs from Plano and Allen who say it’s easier for them to come see us now,” Matney said. She’s also noticed more international customers who stay at the Westin.

The redevelopment plan being considered by Trademark would tear down part of the mall for new construction.

Other malls are also trying to reboot with additional construction.

The Shops at Willow Bend in Plano was purchased from lenders in May after Starwood Retail couldn’t refinance a $137.5 million loan that came due in 2019. The new owners, Dallas-based Centennial and real estate investors Dallas-based Cawley Partners and New York-based Waterfall Asset Management, have plans to redevelop the property. That loan and sale included a suburban Detroit mall.

Collin Creek Mall in Plano went back to lenders in 2015 and was purchased in 2018 by developer Mehrdad Moayedi. His firm, Centurion, tore down the mall and is doing a complete redevelopment that’s still under construction.

Vista Ridge Mall in Lewisville, now called Music City Mall, also went back to lenders in 2016 and has been sold twice since then. It’s struggling with vacancies.