December 2006

FEATURES
Cheaper to build than buy
Development isn’t cheap, what with the high prices of concrete, oil and other materials. But it’s still cheaper than buying retail real estate. Consequently, landlords’ development and redevelopment pipelines are full.
Retail to the rescue
Cities are turning to retail and other uses to make redundant sites useful again. Former factory sites, warehouse districts and other rundown parcels are spawning projects that benefit not only the neighborhoods around them, but also their host cities as a whole.
U.K., Germany to join the REIT club
Britain and Germany are scheduled to become the latest European countries to allow REITs next month. Britain in particular has several property companies chomping at the bit to become REITs.
Britain goes mall steam ahead
There are some 30 regional centers on the drawing board for Britain over the next five years which, should they all open, would add 53 million square feet of retail to the country’s stock.
Power centers for auto dealers
Developers are clustering car dealerships around retail projects in specially designed auto parks.
Poconos revival
Where once the Poconos were a place to visit, increasingly they are a place to live for commuters working in NewYork or Philadelphia. And where homes go, so do retailers.
Golden rules for Web site design
Web sites belonging to multimall landlords have to contain a lot of information. But not all on the home page, please, say design experts, who offer some dos and don’ts.
Mexico’s mall boom
Mexico is seeing a flurry of mall development (as many as 70 are currently under construction, according to some estimates), thanks to a growing middle class and easier access to commercial and consumer financing.
Latin America’s confident Congress
Delegates from every country in Latin America attended October’s International Congress of Shopping Centers, in Buenos Aires, and they reported they’re busier than ever.
The lure of Manhattan
It’s hard and expensive to find sites in Manhattan, but worth the struggle, say some developers and retailers who are succeeding after years of struggle.
Philippines out front
Many who seek examples of the latest in mall and lifestyle center design go to the U.S. But they might equally consider the Philippines.
REITs reign
Some landlords have switched places in this year’s ICSC ranking of the biggest North American landlords.
Selling Christmas at the mall
Christmas marketing campaigns once entailed putting up a tree and hiring a Santa. Oh, that it were still that simple.
Development in brief

Shopping Centers Today -> December 2006

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IN BRIEF

Inland buy to ‘transform’ DDR

Expect Developers Diversified Realty Corp. to undergo a major portfolio transformation once it closes on its $6.2 billion purchase of 43.6 million square feet of retail space from Inland Retail Real Estate, Wall Street analysts say. The Cleveland-based REIT is likely to sell many of its own lower-quality centers now that it will control a bevy of higher-grade assets. “We might expect DDR to significantly lower its exposure to grocery-anchored centers in upstate New York, replacing them with much higher-quality, Publix-anchored centers in the Southeast from this portfolio,” wrote Morgan Stanley REIT analyst Matthew Ostrower in a report. After the merger, Developers Diversified will own 800 shopping centers, totaling 162M square feet. “This deal will be a transformative event for our company,” said CEO Scott A. Wolstein. “This will dispel any notions that our assets are demographically challenged or not up to the growth metrics of our peers. We will emerge with a dream portfolio.”

TIAA-CREF will be a partner in the deal. Developers Diversified will put 67 of the 297 highest-quality properties into a $3 billion joint venture with TIAA-CREF, which will hold an 85 percent stake. Developers Diversified will hold the rest. The firms say leverage will not exceed 60 percent of the aggregate value of the properties, which are located predominately in the Southeast and are anchored by leading discount and specialty retailers. The remaining assets from the Inland deal are largely grocery-anchored and will be wholly owned by Developers Diversified.

CB grows with Crow purchase

CB Richard Ellis Group’s $2.2 billion acquisition of Dallas-based Trammell Crow Co. will create a real estate services giant claiming more than 10 percent of the U.S. commercial real estate market and boasting annual revenue of $4.4 billion. “With the acquisition of Insignia in 2003, we achieved preeminence in our transaction business,” said Brett White, CB Richard Ellis’ president and CEO, in a press release. “Now the acquisition of Trammell Crow Co. creates the best-in-class corporate outsourcing and institutional property management business, and further augments our transaction business.” Los Angeles-based CB Richard Ellis plans to keep the Trammell Crow name. Trammell Crow’s development and investment business will be run as a wholly owned, independently operated subsidiary.

Triple Five takes Mall of America

Canadian development firm Triple 5 Corp. paid Simon Property Group and TIAA-CREF about $1 billion to become sole owner of the Mall of America. The 4.2 million-square-foot mall, which opened in 1992, sees about 44 million visitors per year. Triple Five plans to move forward with a planned 5.6 million-square-foot expansion of the property.

REIT FFO strong in third quarter

REITs continued to grow funds from operations in the third quarter, according to earnings announcements. Kimco Realty climbed to $138.6M, up 19.2 percent from a year ago. Regency Centers rose to $69.5 million, up from $54.2 million a year ago. And New Plan Excel reported $47.8 million, up from the year-ago $30.7 million. Glimcher Realty Trust’s, meanwhile, were $20.7 million, more than double the comparable period’s $9.1 million.

Taubman Centers rose to $47.2 million from $37.8 million a year previously. And Simon Property Group reported $369 million for the period, up 9.4 percent from a year ago. “Strong growth in tenant sales and healthy releasing spreads are driving our results,” CEO David Simon said in a press release. Macerich was up to $86.6M from $81.1 million a year ago. General Growth Properties was a notable exception, with a 7.9 percent decline to $191.8 million. The company said interest expenses contributed to the downtick.

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