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Shopping Centers Today -> July 2002
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WESTCOR TO KEEP OWN NAME
By Dave Bodamer
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When The Macerich Co. announced in late May that it was buying Westcor Partners, ending months of speculation about the fate of the Phoenix-based developer, new questions quickly came to the fore: What will happen to Westcor’s management and development teams? Will Santa Monica, Calif.-based Macerich hold on to Westcor’s community center assets?
The deal has yet to close, but some answers have already begun to emerge. As a condition of the deal, Westcor will retain its Phoenix offices and continue to develop new properties. It will also keep the Westcor name. Its regional malls will likely continue to be managed by Westcor personnel.
“If you look at Macerich, they’ve been a very good acquirer and redeveloper, but they have not done a lot of ground-up development, which is what we do,” Westcor President and CEO Robert L. Ward told SCT. “They’re giving us the task to continue to operate properties as we have in the past, but also to expand our development horizons.” Indeed, the deal will enable Westcor to expand its activities. “We’ve looked primarily in just a couple of states in the past,” Ward said. “This allows us to poke our heads further out of the foxhole.”
At press time Macerich had not said what it intends to do with Westcor’s 18 “urban villages,” which are essentially community centers. Analysts have speculated that the assets may be sold wholesale to another REIT, perhaps Developers Diversified Realty or Kimco Realty Corp. Such a deal, which could be worth more than $400 million, would help offset Westcor’s $1.5 billion price tag.
The Westcor purchase, which had an 8.5 percent cap rate (a figure that analysts called “fully priced”), followed months of uncertainty about Westcor. In February Westcor had hired Eastdil Realty, a New York City-based real estate investment bank, to advise it.
According to the deal’s terms, the purchase price includes a combination of cash, the assumption of $733 million in debt and the issuance of $80 million of convertible preferred operating units.
The acquisition adds nine regional malls — eight in Arizona and one in Colorado, amounting to 10 million square feet — to Macerich’s portfolio. The malls include such high-profile projects as Chandler (Ariz.) Fashion Center and Broomfield, Colo.-based FlatIron Crossing.
Macerich is the sixth-largest mall developer in the United States. With this transaction, Macerich will own interests in 55 regional malls and 21 community centers, for a total square footage of 57 million square feet. Last month Macerich stated its estimated funds from operations (FFO) per share-diluted guidance at $3.11 to $3.18 for 2002. The Westcor acquisition will be accretive to 2002 and 2003 FFO per share.
After Macerich, the leading contender for Westcor was reported to be Chicago-based General Growth Properties, which has been on an acquisition streak lately, buying Salt Lake City-based regional mall owner JP Realty and assets in Hawaii. Others that were said to be interested in the company included CBL & Associates Properties, The Rouse Co., Simon Property Group, Taubman Centers and Westfield Holdings, according to press reports.
Westcor is 73.3 percent owned by institutional clients represented by AEW Capital Management, a Boston-based real estate investment advisory firm. It is controlled by pension funds for AT&T Corp. and Owens-Illinois.
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