After a Busy Fall, Mall Mergers Slow

By Esther Fung 

Deal fervor in mall REITs appears to have notched down a peg.

Expectations for a flurry of acquisitions following multibillion-dollar offers for GGP Inc. and Westfield Corp. last year have dimmed as big potential buyers of large portfolios have stepped back.

Simon Property Group, which in the past has made unsolicited offers to buy out rival real-estate investment trusts Macerich Co. in 2015, GGP in 2010 and Taubman Centers Inc. in 2002, said on Jan. 31 it is out of the big deals business. Blackstone Group LP, another potential buyer, also isn't interested in acquiring mall real-estate investment trusts, according to a person familiar with the matter.

Brookfield Property Partners started the ball rolling in November when it made a public offer of $14.8 billion to acquire the shares of Chicago-based GGP that it didn't already owned. A few weeks later, Paris-based mall landlord Unibail-Rodamco SE offered $15.7 billion for Westfield Corp., which owns marquee properties such as Westfield Century City in Los Angeles and Westfield World Trade Center in New York. No competing bids have emerged.

"Here's what's ironic and funny about all this M&A activity. The market was dying to have a mark on a portfolio," said David Simon, chief executive officer of Simon Property in a recent earnings call. But even though Unibail-Rodamco's offer for Westfield was at a very healthy valuation, "the market yawned on it."

"Remember when the market puked all over [the] Aéropostale [deal]? I'm happy to tell you it had a record year," said Mr. Simon, referring to the flak Simon Property and GGP received when they joined a consortium in September 2016 to rescue distressed retailer Aéropostale Inc.

Some commentators had criticized Simon Property for previous acquisitions, including the Mills Corp. and Corporate Property Investors, but these deals have proved successful over time, said James Sullivan, managing director at BTIG Research.

Other mall REITs such as Bloomfield Hills, Mich-based Taubman and Santa Monica, Calif.-based Macerich received attention from activist investors last year and implemented change-of-control provisions for senior executives, fueling expectations of deal activity. But those expectations have ebbed, at least for now.

"The odds of Macerich being acquired or privatized appear to have moved lower, even with two activists [believed to still be] in the mix," said real-estate research firm Green Street Advisors in a research note.

In a Feb. 1 regulator filing, Ontario Teachers' Pension Plan, which has a 17% stake in Macerich, said its stake is "for investment purposes only, " quashing rumors it was in talks to take Macerich private.

Write to Esther Fung at [e-mail]

(END) Dow Jones Newswires

February 13, 2018 12:56 ET (17:56 GMT)

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