Regency, Macquarie buy $2.74 billion portfolio

In one of the largest portfolio purchases in recent memory, joint venture partners Regency Centers Corp. (No. 13) and Macquarie CountryWide Trust, of Australia, bought 101 shopping centers jointly owned by First Washington Realty and the California Public Employees’ Retirement System for $2.74 billion. The deal, announced in February, bore a cap rate of 6.25 percent, according to Regency.

Regency owns 35 percent of the portfolio, and Macquarie holds the rest.

The portfolio includes open-air neighborhood and power centers in 17 states and Washington, D.C. The properties are 96 percent leased and occupy sites with high barriers to entry in Baltimore, and in Northern and Southern California. Major tenants include CVS, grocer Dominick’s, Rite Aid, Sears Hardware and T.J. Maxx.

The deal is a strategic success for Regency, analysts say, because it provides greater market share on both coasts.

Regency and Macquarie put together a huge loan package to fund the deal, which closed during the second quarter. The package included about $900 million of secured property debt and an $800 million loan from Wachovia Capital Markets and JPMorgan.

In an interview, First Washington Realty Chairman Stewart Halpert told SCT that the firm had beefed up the value of the portfolio since 2001 through a series of sales and acquisitions totaling $600 million. At the time, Halpert said, “It is an attractive time to consider the sale of a portion of the portfolio.”

Macerich buys Wilmorite centers for $2.3 billion

The Santa Monica, Calif.-based Macerich Co. (No. 8) expanded its East Coast presence with the $2.3 billion purchase of Rochester, N.Y.-based Wilmorite, a privately held REIT whose 13.4 million-square-foot portfolio included a 50 percent stake in the high-profile Tysons Corner Center, McLean, Va. The deal, which the parties closed in March, bore a cap rate of 6.75 percent, according to estimates from Merrill Lynch.

"This allows [Macerich] to compete against bigger mall REITs, because they can offer retailers locations all over the country," said Ryan Dobratz, a REIT analyst at Chicago-based Morningstar.

The Wilmorite portfolio, which included 11 regional malls and two community centers, averaged $403 in annual sales per square foot. The portfolio’s three star centers — Danbury (Conn.) Fair Mall, Freehold (N.J.) Raceway Mall and Tysons Corner — average annual sales per square foot in excess of $525. These three properties are headed for Macerich’s new Lumenati program, in which management at the firm’s most upscale properties cater to the special needs of high-end tenants, Dobratz said.

In a press release, Macerich President and CEO Arthur M. Coppola said, “The addition of Tysons Corner Center, Freehold Raceway Mall and Danbury Fair Mall, combined with our recently expanded Queens Center, gives us four premier super-regional malls in the East with combined annual sales in excess of $2 billion.”

DDR pays $1.15 billion for Puerto Rican centers

Last November Developers Diversified Realty Corp. (No. 4) agreed to pay $1.15 billion to acquire 15 Puerto Rican shopping centers from Caribbean Property Group. The transaction included about 5 million square feet of retail space and bore a 7.4 percent cap rate. The properties range in size from the 711,370-square-foot Plaza del Sol to the 132,383-square-foot Rexville Plaza, both in San Juan. “We view this portfolio as ‘lifestyle-like’ and therefore fairly consistent with Developers Diversified's core competencies,” wrote Morgan Stanley analyst Matthew Ostrower in a report. “But the international angle involves new risks.”

Developers Diversified wasn’t the first U.S. REIT to make a play in Puerto Rico. Also in 2004, Simon Property Group (No. 1) paid $309 million for Plaza Carolina in San Juan. But Developers Diversified’s purchase gives it the U.S. territory’s largest collection of retail assets to be owned by a single owner.

Major tenants in the Caribbean Property Group portfolio include Caribbean Cinemas, Kmart, grocer Pueblo, Wal-Mart and Gap Inc. “It appears that half of the assets in the portfolio are blessed with materially larger size and better sales productivity than the other half,” Ostrower said.

The Caribbean deal came just a few months after Developers Diversified finalized financing on its $2.3 billion acquisition of the Benderson Development portfolio. To finance the Caribbean deal, the Cleveland-based REIT used $300 million raised from the sale of its joint venture neighborhood centers. Developers Diversified also assumed $660 million in debt as part of the deal.

Kimco adds 45 net-leased properties to portfolio

In June Kimco Realty Corp. (No. 3) said it paid $85.3 million to an undisclosed buyer for a portfolio of 45 net-leased retail properties in Virginia — in the cities of Fredericksburg, Richmond and Stafford.

The portfolio totaled 311,000 square feet of gross leasable area, Kimco says. Thirty-one properties have ground leases that hold tenants fully responsible for all operating expenses, and structural repairs and maintenance. Tenants include Circuit City, CVS, McDonald’s, Outback Steakhouse, Wachovia, and other national restaurant operators and bank branches.

New Hyde Park, N.Y.-based Kimco also announced plans for two projects in Mexico, where it already owns interests in three properties with joint venture partner GE Capital. In Saltillo Kimco acquired 26 acres for a 352,000-square-foot, HEB-anchored shopping center. And in Pachuca the firm got 11 acres for a 146,000-square-foot, Wal-Mart-anchored center. Kimco did not release a time frame for either project.

CBL, New Plan trade places in Galileo venture

In one of the year’s more complex transactions, CBL & Associates Properties (No. 7) cashed out of its joint venture with Australia-based Galileo Shopping America Trust for about $78 million, and New Plan Excel Realty Trust (No. 9) took its place, selling $968 million worth of properties into the venture.

Under the terms, Chattanooga, Tenn.-based CBL divested its 8.4 percent stake, which comprised 51 power and community centers. CBL took full ownership of two of the venture’s shopping centers, one in Mobile, Ala., and the other in Wilkes-Barre Township, Pa.

In turn, New York City-based New Plan obtained a 5 percent stake based on the 10.4 million square feet of community and power centers it is putting in. CBL sold its management and advisory contracts for the venture properties to New Plan for $22 million.

The transaction does not mean “our exit from the community center business,” said Charles B. Lebovitz, CBL’s chairman and CEO, during a conference call. CBL plans to continue investing in all types of “retail formats,” he added.

Inland builds portfolio through NYSTRS venture

In mid-December 2004, The Inland Real Estate Group of Cos. (No. 5) transferred five shopping centers valued at about $56 million into a joint venture it co-owns with the New York State Teachers’ Retirement System, or NYSTRS. The venture was launched in October 2004.

According to Inland COO Mark Zalatoris, those properties were the 175,000-square-foot Chatham Ridge, Chicago; the 102,600-square-foot Cobbler Crossing, Elgin, Ill.; the 117,000-square-foot Marketplace at Six Corners, Chicago; the 102,400-square-foot Shoppes of Mill Creek, Palos Park, Ill.; and the 207,600-square-foot Woodfield Commons, in Schaumberg, Ill.

Oakbrook, Ill.-based Inland also sold three additional centers, valued at a total $44 million, into the trust over the following months, bringing the value of its contributions to $100 million.

Albany, N.Y.-based NYSTRS kicked in $50 million for a 50 percent stake in the eight properties, Zalatoris says. The partners formed their venture with a view to buying as much as $400 million worth of neighborhood and community retail centers in the Midwest.

Calloway doubles size

Calloway REIT (No. 34) says it is Canada’s largest owner of open-air centers after its $960 million acquisition of 36 properties in June. The company bought stakes in centers and development sites from Toronto-based private developer First Professional Shopping Centres and Wal-Mart Canada.

First Professional will continue to manage most of the properties. Toronto-based RioCan, which owns a more mall-based portfolio, remain’s Canada’s largest retail REIT.

Mills’ Midwest move

In February The Mills Corp. (No. 10) bought two landmark Midwest malls for $452 million at a 6.4 percent cap rate from a joint venture of Blackstone Real Estate Advisors and Polaris Capital. The properties, which were both 88 percent leased, are the 1.3 million-square-foot Southdale Center, Edina, Minn., the first enclosed regional mall in the U.S.; and the 1.2 million-square-foot Southridge Mall, in Greendale, Wis., the largest shopping center in that state.

Mills said it plans to remerchandise a vacant Mervyns store at Southdale and re-lease a 46,000-square-foot former Younker’s at Southridge, according to a news release. The Mervyns could be leased to a fashion department store and some small shops, said Laurence C. Siegel, Mills’ chairman and CEO, in the release, though for Younker’s he specified no other plans.

Westfield’s heartland

The No. 6-ranked Westfield Group’s purchase of Chicago Ridge Shopping Center was only the first step in the firm’s plans to expand in the Midwest, an observer predicts.

“This move gives them a base to acquire other properties and continue their thrust into Milwaukee and other areas,” said Dan Martin, senior investment adviser at brokerage firm Sperry Van Ness.

Westfield announced in January that it had acquired the 833,449-square-foot mall in Chicago Ridge, a suburb of Chicago, for $108 million at a cap rate of 8 percent. The center, which was renamed Westfield Chicago Ridge, is anchored by Carson Pirie Scott, Kohl’s and Sears. Chicago Ridge opened in 1981 and was last renovated in 2004. Total sales for 2003 were about $186 million, according to Westfield.

In the Chicago area. Westfield already owns several high-profile shopping centers, including Old Orchard. “Chicago Ridge provides an excellent geographic fit with our Chicago cluster and offers both short- and long-term redevelopment opportunities,” said Westfield’s Managing Director Peter Lowy, in a news release.