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The Top 75 Shopping Center Owners

Buying and selling properties has always played a major role in the shopping center industry, but the velocity of these multimillion-dollar transactions ebbs and flows depending on the overall mood of the capital markets and big-picture trends such as consolidation. Against this backdrop, mergers and acquisitions have effectively altered the playing field among owners in the 1990s.

While no one can predict precisely the pace of activity in 2000, Ron Fullam, senior vice president of CBL & Associates Properties Inc., a Chattanooga, Tenn.-based REIT, says the trend will continue as long as there are properties to be bought or sold. "From the REIT perspective, the driving force is the need to increase FFO (funds from operations) and grow," he says. "From the private investor or owner perspective, it is their desire to take profits in a good market."

CBL increased its retail ownership portfolio by approximately 3.8 million sq. ft. in the past year, according to Shopping Center World's annual ranking of the top shopping center owners. CBL currently holds the No. 10 spot with nearly 35 million sq. ft.

One company that is new to the list is Regency Realty Corp., a Jacksonville, Fla.-based REIT that concentrates on community and neighborhood shopping centers. The company was in the midst of acquisitions when last year's survey was conducted and, therefore, did not participate. Today, it holds the No. 15 spot with more than 25 million sq. ft. of retail GLA owned.

Edens & Avant, a Columbia, S.C.-based private company, also made great strides in the past year as a result of purchases and new developments. The company jumps from No. 31 to No. 25 with an increase of 3.5 million sq. ft. of shopping center space owned, a major boost for a necessity retail-focused company.

Indianapolis-based Simon Property Group continues to buy, increasing its portfolio by more than 9.5 million sq. ft. and maintaining the No. 1 spot with more than 145 million sq. ft. of retail GLA owned.

Several other companies also made major jumps in square footage owned. The Macerich Co. (Santa Monica, Calif.) increased its holdings by 7 million sq. ft. to capture the No. 5 spot, and The RREEF Funds (Chicago) is up approximately 10 million sq. ft., now ranking No. 17. Glimcher Realty Trust (Columbus, Ohio), Zamias Services Inc. (Johnstown, Pa.) and Equity Investment Group (Fort Wayne, Ind.) all showed increases of about 5 million sq. ft.

While some companies continue to increase their holdings each year, the rate of mergers and acquisitions appears to be slowing. When the results were compiled for last year's survey, changes from the previous year were much more dramatic. For example, Simon increased its ownership portfolio by 30 million sq. ft., General Growth Properties (Chicago) was up 22 million sq. ft., Westfield (Los Angeles) increased by 21 million sq. ft. and Kimco Realty Corp. (New Hyde Park, N.Y.) was up 18 million sq. ft.

Fullam of CBL expects the slowdown to continue. This year, he says, "we think it will actually subside because money will be tighter and because so many acquisitions took place in '97-'98-'99 that it's going to be more difficult to find good properties to invest in."

Martin E. Stein Jr., chairman and CEO of Regency Realty, adds that in order for further consolidation to occur in the community and neighborhood shopping center sector, prices would need to be reduced significantly.

As for the types of centers that will be most attractive to financiers in 2000, Stein points to grocery-anchored shopping centers and malls. "Centers anchored by a dominant supermarket chain will be attractive due to their Internet- and Wal-Mart-resistant attributes," he says. "Dominant malls also will continue to be attractive as a result of their sustainable competitive advantage."

William J. Maher, director of North American Research for Chicago-based Jones Lang LaSalle, predicts that top catches for financiers will be Class A regional malls, power centers anchored by strong tenants such as Wal-Mart and Target, and strip centers anchored by supermarkets with strong market positions and credit.

He's not so optimistic about entertainment centers, however. "Entertainment centers will be less popular than in 1999 (although still attractive) due to concerns about the creditworthiness of the cinema companies," he says.

Regardless of what types of centers catch the eye of investors, it's a safe bet to assume that some buying and selling will continue. Maher cites several reasons for so many properties changing hands:

* The continuous evolution of retailers and formats are changing the financial characteristics of many centers.

* REITs are selling non-strategic or low-growth properties to raise cash.

* Institutions no longer have a buy-and-hold mentality and are evaluating disposition options as soon as they buy a property.

* Private investors are buying troubled assets, fixing them and selling in order to realize gains.

As portfolio shifts and company acquisitions continue to play a role in the retail industry, SCW will stay on top of the trend through various articles and surveys throughout the year. SCW's ranking of the top 75 owners is based on total shopping center/freestanding retail GLA owned through Sept. 30, 1999. In the case of joint ventures, respondents were instructed to report only their percentage of ownership.

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