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November 19, 2013

Starwood Wraps Up $1.6B Mall Portfolio Purchase

By Barbra Murray, Contributing Editor 

Plaza West Covina

Plaza West Covina, Calif.

Good relationships go a long way. Starwood Capital Group has just completed its second major portfolio purchase from Westfield Group, snapping up seven regional malls in the West and Midwest for just over $1.6 billion. The acquisition adds 7.9 million square feet of high-quality space to the mushrooming portfolio of Starwood Capital’s retail real estate platform, Starwood Retail Partners.

Starwood Capital’s new holdings span four states, including California, where Parkway Plaza and Plaza West Covina swing open their doors to shoppers daily in El Cajon and West Covina, respectively. Capital Mall in Olympia, Wash., rounds out the West Coast portion of the portfolio. The group also features three Ohio malls: Belden Village Mall in Canton, Franklin Park Mall in Toledo and Great Northern Mall in North Olmstead. And Southlake Mall in Merrillville, Ind., completes the collection.

Starwood Retail will take on management and leasing responsibilities at the properties and, along with Starwood Capital, perform asset management functions as well. Under the new ownership, capital improvements are in store for all seven malls.

Westfield will have a role, too–that of partner. As part of the transaction, the Sydney, Australia-based shopping center giant, which maintains a strong interest in increasing its presence in the U.S. market, is holding onto a 10 percent stake in the portfolio. Westfield’s decision to sell the majority interest in the malls dovetails with the company’s current strategy of selling non-core assets and redeploying the capital into investments in properties in major cities. A company spokesperson told Commercial Property Executive that current U.S. market priorities and future opportunities include New York, New Jersey, suburban Washington, D.C., Los Angeles, San Diego and San Jose, Calif.

As for Westfield’s plans for additional dispositions in the U.S., the company had no comment on the matter, so it’s unclear if there will be additional portfolio transactions between the friends anytime soon. It was in June 2012 when Westfield sold an eight-property, 6.6 million-square-foot shopping center portfolio to Starwood Capital for roughly $1 billion, a transaction that effectively served as the launching pad for Starwood Retail.

Whether Westfield and Starwood Capital complete another portfolio deal or no, Starwood Capital is still in buying mode.

“We believe that regional shopping malls offer an attractive value proposition for our partners,” Scott Wolstein, CEO of Starwood Retail, said in a prepared statement. “We look forward to selectively pursuing new opportunities to expand our portfolio.”

Starwood Capital isn’t the only retail real estate player that’s been buying big–big portfolios for big bucks. In early October, DDR Corp. announced that it had completed its $1.4 billion acquisition of the remaining 95 percent interest in a group of 30 power centers totaling 11.8 million square feet from its joint venture with Blackstone Real Estate Partners VII L.P.

Billion-dollar deals are rare, but plenty exceed the quarter-billion mark. Kite Realty Group Trust announced earlier this month that it had entered into an agreement to purchase a nine-property, 2 million-square-foot portfolio of predominantly grocery-anchored shopping centers for $307 million in an off-market transaction. In October, Kimco Realty Corp. inked a deal to acquire a 24-property, 1.4 million-square-foot retail portfolio in New England for $270 million.

 

 

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