The business of running malls has been reeling, but Wall Street is learning it isn’t always easy to make money from their troubles. Alder Hill Management LP, which aimed to profit by betting against debt tied to some of the country’s weakest malls, ended this trade over the summer, the Wall Street Journal reported. Eric Yip, a founder of the New York-based hedge fund, is also winding down the entire $300 million hedge fund. While some of Alder Hill’s other trading strategies had been profitable, its two and a half years of losses shorting mall debt convinced Yip to shut down. Alder Hill and other short-sellers — or traders who bet that the price of a bond, stock or other asset will fall — have found that their wagers against commercial mortgage-backed securities tied to retail property didn’t go as planned. That is largely because the rise in retailer bankruptcies and store closures since 2017 didn’t produce a significant increase in missed loan payments by mall owners, according to data from commercial mortgage tracker Trepp LLC. Since a significant number of these loans require interest-only payments, or have a partial interest-only payment schedule until they mature, property owners have been current on their loans despite weaker rents, said Dylan Wall, a research analyst at Trepp.
