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Shopping Centers Today -> August 2001
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A REQUIEM FOR THE REITS
By Debra Hazel
As you go down the list of names, you can almost hear them playing taps: Price REIT. DeBartolo Realty Trust. Burnham Pacific Properties. McArthur/Glen Realty. These are just a few of the shopping center development firms that plunged into the REIT market, only to be swallowed by a tidal wave. Price, DeBartolo and McArthur/Glen all were acquired by competitors (Kimco, Simon Property and Horizon Group, respectively), while Burnham is liquidating.
“If they had all been well capitalized, would they have gone public? I don’t think so,” said James Easler, managing group leader of Teachers Insurance and Annuity, the New York City-based pension fund.
In some cases, those problems didn’t go away, and it provided greater value to the shareholders to sell to a healthier company. Other REITs sold projects to get themselves back into the development game. CenterTrust, which originally went public as Alexander Haagen Realty, sold nearly all of its portfolio to clear up existing debt.
The outlet sector was particularly hard hit, with six REITs essentially reduced to three: While Chelsea Property Group, Tanger Factory Outlets and Prime Retail survive, McArthur/Glen Realty merged with Horizon Group, which then sold most of its properties to Prime Retail.
Overzealous growth may have been a factor. Poorly conceived centers were built, and many companies underperformed, noted David C. Bloom, chairman and CEO of Roseland, N.J.-based Chelsea, one of the most successful outlet REITs.
Yet even companies that “failed” may have benefited their owners, given that retail REITs remain undervalued, said Lee Schalop, research analyst for Bank of America, New York City.
“If you look at the shareholders of these companies, they could be wealthier today from being bought than from being the buyer.”
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