Lincoln Property Co. is investing in another U.S. real estate company's operations in a bet they can turn underperforming retail space into thriving mixed-use destinations as property professionals across the country grapple with what to do with unused malls.

After Lincoln Property made a recent undisclosed investment into Centennial, the duo began a shopping spree that has no limits as of now for the right retail centers they can acquire and reposition or redevelop the properties, Centennial President Whitney Livingston told CoStar News.

The partnership is seeking to buy large format, retail-centric projects including malls and open-air retail hubs with underperforming sales that could benefit from a different, mixed-use approach, Livingston said.

"We believe we are pushing off the bottom of the pool right now," Livingston added. "Disruption breeds opportunity. That's not always at an asset level, but sometimes at an ownership level as loan maturities hit. It's a good time to buy."

Like other retail real estate dealing with the rise of e-commerce, malls must evolve and change to appeal to their customer, offering experiences, restaurants and possibly even a place to stay, analysts say. A recent JLL report notes that there were only roughly 1,150 malls in the United States at the end of 2022, down from about 1,500 malls in 2005, showing their waning appeal.

To survive, mall owners have had to continually reinvest or reposition their properties, analysts say. In the Dallas area, two of the most-visited malls — NorthPark Center and Stonebriar Centre — have added experiential options for visitors, including a kids’ amusement park, Italian dining experience Eataly, a new full-service hotel and public library locations.

Dallas-based Centennial is bringing its experience on retail, restaurants and experiential portions of a mixed-use development from its 27 years operating in the nation's top markets in 18 states to the partnership to help create a customized retail plan built around a mixed-use project. Lincoln Property, meanwhile, has experience in office, multifamily, hotel and other real estate types in 35 U.S. markets.

"What we've learned over the last decade in executing mixed-use projects is that it's a joint effort," Livingston said. "If you have retail experts planning multifamily, it doesn't work. Likewise, if you have experiential retail, you have to make sure the right decision-makers are at the table. All of it is critically important in creating a dynamic destination."

Livingston said the retail real estate industry got in trouble over the past few decades replicating a ubiquitous indoor mall throughout the country, significantly overbuilding this type of real estate in places where it hasn't worked.

"We need to understand the needs and wants of a specific community and customize a business plan that will address these needs for the decades to come," Livingston added.

It is expected to take a lot of capital to get the proposed projects stemming from the Lincoln Property and Centennial partnership over the finish line, Ali Daubert, Dallas-based Lincoln Property's chief strategy officer, told CoStar News.

Plans could include de-retailing aging real estate and developing new commercial space from the ground up, Daubert said.

The partnership comes fresh off Lincoln getting a major investment last year from private equity firm Stone Point Capital to expand its business nationally and globally. Lincoln Property — with Stone Point's help — and Centennial are expected to use their shared balance sheets to land deals and bring their relationships and contacts to the table to transform real estate across the country.

"Everyone at these firms have great relationships, and we hope to put them to work," said Daubert. "We want to bring new expertise to projects," citing how Centennial's expertise could further help Lincoln develop projects like The Star in Frisco, a 91-acre mixed-use development that serves as the world headquarters and practice facility for the Dallas Cowboys. Lincoln helped develop The Star to bring in "fans for more than a game, but a place where they can live, play and stay for the weekend," Daubert said, adding, "Centennial has that expertise."

This isn't the first time Lincoln has leaned into the retail sector since Stone Point Capital invested in the real estate firm. Last year, Lincoln launched a joint venture with retail investment firm Paragon Commercial Group.

The new collaboration with Centennial is expected to be accretive to Lincoln's existing retail platform led by Jim Dillavou, who is Lincoln's national head of retail real estate and retail capital markets, and is expected to remain focused on Lincoln's broader retail business, including neighborhood retail centers, mixed-use campuses and ground-floor amenity retail and triple-net assets.

"We believe the pipeline is deep for the properties we are looking to buy, and we are going to see a lot of opportunities in the next 36 months," Daubert told CoStar News, adding that the deals are expected to include off-market deals coming from the firm's relationships and even on-market deals for the properties. "Stone Point, a best-in-class capital partner to Lincoln, will continue to pair up and go on a shopping spree of sorts. This is a buyer's market for real estate, and it's time to go shopping."