Good morning. Andrew here. Wall Street is buzzing this morning over a single figure: $25 million. That is the total compensation awarded last year to Kathy Ruemmler, Goldman Sachs’s departing general counsel, according to a company proxy filing released late yesterday. Ruemmler, a former White House counsel and seasoned defense attorney, resigned from the firm following a wave of scrutiny sparked by the release of the Epstein files. The documents revealed extensive email correspondence between Ruemmler and the disgraced financier Jeffrey Epstein when she was in private practice. While Ruemmler was never Epstein’s formal legal counsel, the communications painted a complex picture: She appeared to offer informal legal advice and guidance, while Epstein seemingly provided her with referrals to other high-profile clients. As the details became public, a growing chorus of critics — both inside and outside the firm — questioned how she could remain in a role that involved managing reputational risk. While Ruemmler initially resisted stepping down, the pressure eventually became a “distraction” she could no longer ignore. Throughout the controversy, the Goldman Sachs C.E.O., David Solomon, and the board of directors remained steadfast in their support. They maintained that Ruemmler had been transparent during her initial hiring process and that a prior review had cleared her of any wrongdoing. For those who doubted the depth of the firm’s loyalty, the $25 million payout, up from $22.5 million the year prior, serves as a definitive, if eyebrow-raising, proof of their backing. In today’s newsletter, DealBook contributor Ian Frisch dives deep into an unlikely success story in real estate. And my colleague Sarah Kessler interviews Sebastian Mallaby, whose upcoming book profiles the DeepMind founder Demis Hassabis, one of the most fascinating and consequential leaders in the A.I. race. (Was this newsletter forwarded to you? Sign up here.)
A surprise comeback
The mall is dead. At least, that’s been the conventional wisdom among real estate developers for decades. If owners of malls were lucky, the theory went, they might be able to repurpose the buildings into fulfillment centers or residential complexes, worth just a fraction of their former value. But most sprawling shopping centers would inevitably turn into blighted, toxic assets. And that is, in fact, how the story has mostly played out — until recently. Now, as Gen Z embraces in-person shopping, a handful of real estate firms are, unexpectedly, winning big on a very specific type of mall. Take Simon Property Group, which owns the most class A malls in the country. Its property Roosevelt Field, east of New York City, has a 96.3 percent occupancy rate and hosts coveted luxury tenants like Savage X Fenty, Armani, Hermès and Rolex. Even as surrounding shopping malls sell at auction for a huge discount off their peak value, the tenants at Roosevelt Field can, according to Simon Property, make $1,250 per square foot of rented store space. The store fronts are in high demand. Shopping malls, like so many sectors in the economy, are making a K-shaped recovery, with those that serve the highest end customers seeing a surprise resurgence.
Real estate firms that have figured out how to harness the comeback are riding the wave. Simon Property Group, for example, has seen its stock price double in three years, and its revenue rise nearly 6 percent year-over-year. “It’s absolutely a ‘haves and have-nots’ type of industry now,” said Vince Tibone, a managing director at the analytics firm Green Street, who specializes in U.S. malls. “It’s just a chasm of difference in cash flow growth profiles between the good and bad assets.” The goodThere are roughly 900 malls in the United States, but only a small sliver are successful. The top 100 account for 50 percent of the entire sector’s value, according to Tibone, whereas the bottom 350 make up 10 percent. Revenue at class A malls is growing by 5 percent each year, and financing is easy to come by. The commercial mortgage-backed securities for this market has doubled from $4 billion in 2024 to roughly $8 billion in 2025. GGP, a division of Brookfield Properties that focuses on malls, has seen its top-tier assets thrive since the pandemic waned. Across 100 mall properties, its vacancy rate is hovering around 95 percent. Tenant sales have risen nearly 20 percent since 2019, and sales per square foot at some trophy properties have climbed 60 percent over the same time period. “We’re able to increase our rents every year,” said Kevin McCrain, the chief executive of GGP. McCrain credits the performance of GGP’s portfolio both to fundamental demographics, such as local consumer income, and the firm’s management approach. Whereas a shopping mall could succeed in the 1990s because of one large anchor tenant, today mall operators like Simon and GGP curate a balanced array of retail, experiential, and food and beverage offerings.
It wasn’t easy to get to this point. Since 2018, GGP has shed over two dozen underperforming malls, and its prepandemic plans to turn some shopping centers into mixed-use miniature cities have hit roadblocks. “If an asset becomes noncore, we’ll ultimately sell it and reinvest our capital into other assets,” McCrain said. “Good dirt is good dirt, and sometimes that dirt needs to be something else.” The badLike most American malls, Palisades Center, a sprawling four-story complex in New York’s Hudson Valley, is struggling. In the early 2000s, it was valued at over $880 million, drew 24 million shoppers per year, and even boasted a skating rink that was inaugurated by the Olympic figure skater Nancy Kerrigan. But after being saddled with debt and abandoned by its anchor tenants, including JC Penney, which is now bankrupt, the troubled shopping mall was sold at auction earlier this month for just $175 million. Like Palisades Center, which is just 50 miles from Simon Property Group’s Roosevelt Field, most malls are in a death spiral, with revenue shrinking by about 5 percent a year across properties labeled “Class B” and “Class C.” According to commercial real estate analytics firm Trepp, 11.2 percent of the $53.23 billion in loans backed by regional and “super-regional” malls are delinquent, compared with 7 percent for all commercial mortgage-backed security retail loans. These distressed malls have difficulty signing tenants, which deters customers, which plunges their value, which puts further pressure on the debt load. About 40 malls close per year in the United States. The pandemic accelerated the downward trend of these lower-tier malls, with three major property owners — CBL Properties, Washington Prime Group, and Pennsylvania Real Estate Investment Trust — declaring bankruptcy from 2020 to 2023. ‘A pure luxury asset’Shopping malls’ K-shaped trajectory mirrors other sectors that are chasing well-off consumers who have money to spend. Corporations ranging from Delta to Disney are shifting their business models to cater to wealthier consumers, whose spending is growing much faster than for other shoppers. The same goes for well-performing malls: Courting the richest customers pays off. GGP’s McCrain called one of the firm’s most successful properties, Tysons Galleria outside Washington, D.C., “a pure luxury asset.” Elevating malls into luxury destinations has paid off. According to GrowthFactor, a retail real estate management company, mall foot-traffic rose 9.7 percent in 2024, with visits averaging close to an hour. Cushman & Wakefield found that rents are at all-time highs. This rebirth has caught the attention of the ultimate stay-at-home company, Netflix, which has launched Netflix House in Dallas and Philadelphia, locations that showcase interactive experiences related to hit shows “Stranger Things,” “Wednesday,” and “Squid Game.” Much of this recent success and innovation has been driven by Gen Z, which has become infatuated with IRL shopping experiences. According to the Ipsos Consumer Tracker, 58 percent of shoppers aged 18 to 34 said they shop at malls often, twice the rate of adults over 55. As consumers, retailers, and investors flock to curated malls with diversified shopping and entertainment offerings, the have-nots will continue to perish. Because of the complex nature of mall foreclosures, and the hundreds of millions of dollars at stake, many will turn into zombie properties. “It takes longer for this to play out,” Tibone said, “even if it feels like the writing’s on the wall.”
Analysts worked to gauge the economic impact of war in the Middle East. Gasoline prices have jumped by about a dollar a gallon nationally since the war began, and European leaders are strengthening trade ties with China. The Pentagon has asked for more than $200 billion in additional war funding, signaling that it expects the war to drag on. The U.S. stepped up attacks to clear the Strait of Hormuz. As oil prices remained high on Friday, warplanes and attack helicopters have expanded attacks on Iranian targets in an effort to choke off efforts to stop traffic through the waterway, where a large share of the world’s oil and natural gas pass through. The Treasury Department on Friday temporarily lifted sanctions on Iranian oil currently at sea in an effort to shore up the global market. Jay Powell said he would remain Fed chair until his successor is confirmed. Powell’s term as chair ends May 15, but he can continue to lead the central bank until his successor is in place, and Trump’s pick, Kevin Warsh, awaits a date for his confirmation hearing in the Senate. In comments made after the Fed voted to leave its benchmark lending rate unchanged on Wednesday, Powell also said he would stay on as a governor until the Trump administration wrapped up a criminal investigation into his handling of renovations at the Fed’s headquarters. More big deals: Jeff Bezos is said to be raising $100 billion to give manufacturing companies an A.I. revamp. Kraft Heinz and Unilever reportedly considered a food merger. And the S.E.C. wants to let public companies report two — instead of four — times a year.
‘The future of the world in his hands’Books by the journalist Sebastian Mallaby have delved into the worlds of venture capital, hedge funds and the Federal Reserve. But compared with his upcoming biography of Demis Hassabis, the C.E.O. of the Google owned A.I. company DeepMind, he said, “nothing I’ve ever looked at before rises to the same level.” In “The Infinity Machine,” Mallaby tracks Hassabis from the point when, as a teenage chess prodigy, he decides to build A.I., through to the sale of his company to Google, his Nobel Prize and his pivotal role in the A.I. race. Mallaby said the “ultimate fascination of the project” was “documenting the work of somebody who kind of has the future of the world in his hands, even though he can’t quite control what he does with this power.” Mallaby talked with DealBook’s Sarah Kessler about what that was like. The interview has been condensed and edited. Reading the book, I was troubled by how often A.I. researchers compare their work to the atomic bomb. You write that in this case, they understand that this is a potentially very destructive technology. And yet reading your account, it seems like that hasn’t really changed how they act. Why? They had these different theories about why they would control it. But then none of them work. Demis starts with the idea that only one lab would build it, so there wouldn’t be a race and they could be super careful about releasing anything. And then when OpenAI is founded, that vision goes up in smoke. Then there’s a theory about, well, we can have governance within Google at least. They spent three years on a secret negotiation to try to get an external board of powerful people to have the final say on how the technology is deployed. And although the door is not slammed in their faces, ultimately Google is not going to do that. And then there is a theory about aligning the technology through engineering innovations. But engineering the safety into the system depends on going slow enough to build it in every time you get a new capability. So none of those theories worked out. Eventually, Demis is reduced to this position of saying, the best thing I can do for safety is build it as fast as possible, so that I’m an influential player within Google. And when the time comes to make a tough decision, I’m a good person and I will have a say. Are you comforted by this? No. My own view is that we desperately, desperately need governments to step in and impose governance on the labs. What we have now is precisely the opposite of that — when Anthropic tried recently to suggest some rules around military A.I., the government refused to contemplate any kind of safety-based deceleration. At one point in the book, the A.I. researcher Thore Graepel is comparing what happened with A.I. mastering the game of Go with how we can expect to view the future. And he says, “At first, it looks harmless. Then it’s just completely dominating. We don’t understand the mechanics, the tactics, the strategies. We just know that it is in control.” That for me was a chilling moment. Wondering if there was an “aha” moment for you, either of pessimism or optimism. I was wandering around for like a year and a half thinking, yeah, you know, A.I. will be cleverer than us and it will be able to think up strategies and games that we don’t understand. But we have evolved over centuries to have a survival instinct, and A.I. doesn’t have that evolutionary impulse. That was my kind of way of comforting myself. But Geoffrey Hinton pointed out to me that in order for your A.I. to be really useful, it needs to protect itself from cyberattacks and therefore by definition you’re giving it an objective of surviving, of experiencing something like fear or pain when an attack is starting and aggressively fighting to defend itself. And once you’ve done that, that thing that I was comforting myself with earlier gets a big whack. I mean, whether it quite completely goes away, I’m not sure, but it definitely takes a big whack. What do you see as the major outstanding questions of this story? Whether governments step up. Basically, you’ve got something that is more powerful than the Industrial Revolution. And after the Industrial Revolution, what happened? There were political revolutions across Europe. “The Communist Manifesto” in 1848. Big social and political upheavals begin with technological change. And if we sit here in the 21st century and forget what happened in the 19th century, I think we’re making a massive mistake. What would governments stepping up look like? There’s two theories. You want something like the F.D.A. or possibly the Fed. This government agency should have the ability to look at the models and decide if they’re safe to be released or not. And then the second big thing we need to address is open source, which means once it’s downloaded, there’s nothing that the builder of the system can do to get it back or control it or put limits on it. Why would you ever want to give up the ability to switch off an A.I. that has been used to, say, hack all the power and water infrastructure in your country? Is it realistic that governments would take those steps? For either of these things to work, you do need China to participate. What the U.S. should have done is said, we’re both going to get this technology. The right model for this is the Nuclear Nonproliferation Treaty. I think the Biden administration chose instead to treat China as the enemy as opposed to the potential collaborator. But you asked, “how does this play out?” I’ve given you a long riff about how I hope it would play out, with government stepping up. But the alternative is there’s some big, big disaster and A.I. does something terrible. And then we wake up. Quiz: A.I. fictionThis question comes from a recent Times article. Click an answer to see if you’re right. (The link will be free.) The publisher Hachette pulled the horror novel “Shy Girl” on Thursday over allegations that it was largely generated by A.I. While there’s no way to know exactly how much A.I. is being used by authors, trends in self-published books may offer some clue. In 2024, 2.5 million books were self-published by authors, according to Bowker. How many books were self-published last year? We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times. Thanks for reading! We’ll see you Monday. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.
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