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RODAMCO BREAKUP RESHUFFLES MALL DECK

By Dave Bodamer

Full ownership of Garden State Plaza, Paramus, N.J., one of several prominent centers involved in the Rodamco deal, goes to Westfield.

The early January breakup of Rodamco North America has ended the Dutch company’s brief run as a mall operator in the United States and reshaped the national mall landscape.

Rodamco’s 35 regional malls, including some of the most prominent U.S. retail properties, are being divided among The Rouse Co., Simon Property Group and Westfield Holdings, under a $5.3 billion deal, including the assumption of $2.1 billion in debt. The deal includes such high-profile malls as Garden State Plaza, Paramus, N.J.; the Houston Galleria; and Water Tower Place, Chicago (see chart, below).

Meanwhile, Rodamco’s third-party management arm, Urban Retail Properties, which it purchased in October 2000 along with 24 regional malls, will remain intact; the entity will be jointly owned by Rouse, Simon and Westfield, though it will turn over management of the now 35 regional malls to the new owners. Elsewhere it will maintain management contracts for more than 40 million square feet of regional mall space throughout the country.

“The intent right now is that Urban Retail Properties move forward,” Urban spokeswoman Cindy Bohde said. “It’s the feeling of the three buyers that this will continue to be a viable company and that it will grow.”

Sydney, Australia-based Westfield will get the largest chunk (43 percent) of Rodamco. Indianapolis-based Simon and Columbia, Md.-based Rouse will end up with 30 percent and 27 percent, respectively.

Westfield will acquire 14 malls as a result of the transaction, Simon will get 13 and Rouse will receive eight. The deal also allows each company to acquire remaining ownership interests in existing joint-venture assets. As of press time, the deal was expected to close by the end of March.

“We think that it was a good transaction for all parties,” Peter Lowy, CEO of Westfield America, Westfield Holdings’ Los Angeles-based subsidiary, told SCT.

The people currently managing the malls purchased by Westfield Holdings will most likely be kept on, becoming Westfield employees, Lowy said. Simon and Rouse are also assuming management of the centers they are acquiring, but those companies have not announced any decision about whether they will keep the same individuals or bring in new teams.

According to industry analysts, the deal’s clear winner is Westfield Holdings, which for months had pursued a hostile takeover of Rodamco North America. After the deal closes, Westfield America will be the third-largest U.S. regional mall operator, trailing only Simon and Chicago-based General Growth Properties in terms of gross leasable area. Westfield Holdings’ portfolio, after the Rodamco transaction and a pending deal with the Cleveland-based Richard E. Jacobs Group have closed, will consist of 62 regional malls.

The deal settled months of jockeying for control of Rodamco. Westfield Holdings already owned a 23.9 percent stake in the company before embarking on a hostile takeover bid last September, proposing that Rodamco turn over management of its U.S. regional malls. In the process, it tried to replace Rodamco’s management and supervisory boards. The battle moved to the Dutch courts, as Rodamco challenged the suitor’s purchase of stock from a Dutch pension fund and issued millions of new shares to reduce the proportion of Westfield Holdings’ interest.

The company left disappointed by the transaction appears to be General Growth, which had mounted a bid for Rodamco, only to be turned down. General Growth had already raised more than $350 million through a stock offering to finance the deal — money that it had no other immediate use for, prompting some concern and downgrades from REIT analysts.

But by early February General Growth’s fortunes had begun to turn. The company reported a 12.2 percent increase in its funds from operations for 2001, prompting analysts to restore its previous ratings.