Macerich buys passive mall stake

Real Estate Alert, June 2, 2004

Macerich Co.'s acquisition last week of a 50% stake in a trophy mall is unusual because the REIT will be a passive investor in the Dallas property.

Macerich bought the stake in the 1.3 million-square-foot NorthPark Center from the Nasher family, whose patriarch, Raymond Nasher, developed the property in 1965.

While the REIT confirmed the acquisition it provided no other details. But retail players pointed out that the investment was atypical for Macerich, a hands-on mall operator. Nasher's in-house group will continue to manage the property, and Macerich will have only limited rights to review and approve leases. Retail players said the REIT likely paid about $180 million, which would produce an initial annual yield of about 6.5%.

The Nashers' insistence on retaining the management rights and day-to-day control of the property was a deal-breaker for Rouse, which aggressively pursued the offering until the Nashers made it clear they would not surrender management rights, sources said. Rouse has been acquiring high-end assets recently, most notably paying $510 million for Providence Place mall in Rhode Island.

As for Macerich, it is evidently positioning itself to take a more active voice in NorthPark's operations down the road--if the Nashers decide to sell or give up control.

The Nashers' broker, Heitman Financial, shopped the stake quietly to only a handful of players. It's not clear if the two largest mall firms, Simon Property and General Growth Properties, were approached.

The Nashers were likely looking for an infusion of capital to help with a renovation currently underway that will add a Nordstrom store and specialty retailers to the mall's line-up.

NorthPark is anchored by Foley's, Dillard's, Nieman Marcus and Lord & Taylor. The Foley's and Dillard's stores are the top-performing outlets of those retailers in Texas. The Neiman Marcus store is one of that chain's best performing outlets in the country.

The 145 in-line shops are 99% occupied and generate more than $550/sf in sales.