September 9th, 2009Macerich Sells 75% Stake in Denver Area Mall
Mall owner Macerich Co. sold a 75% stake in its FlatIron Crossing Mall near Denver to private investment firm GI Partners, marking the second deal in Macerich’s strategy to pare its debt by selling stakes in its malls.
GI Partners paid Macerich $116 million in cash and assumed $136.5 million of the Broomfield, Colo., mall’s $182 million mortgage. The deal comes nearly five weeks after Macerich sold a 50% stake in its Queens Center mall in New York to Ontario Teachers’ Pension Plan’s Cadillac Fairview Corp.
Macerich plans three such joint-venture pacts as part of its larger plan to cut its $7.9 billion debt load by at least $1 billion and perhaps by as much as $2 billion within two to three years. All told, Macerich estimates that the three deals, once completed, will bring $425 million in cash and take roughly $475 million in debt off its balance sheet. Macerich expects to finalize its third joint venture this month.
Macerich, which owns stakes in 72 U.S. malls, also is selling smaller properties outright and intends to eventually sell new stock to raise capital for paring debt. But Macerich Chairman and Chief Executive Art Coppola has stuck to a strategy of selling the mall stakes first and the new stock later, arguing that Macerich gets more return for selling the stakes than issuing stock at current levels.
“One of the motivations of doing these joint ventures has to do with the fact that the private market clearly sees the values of our assets being significantly higher than the public markets do,” Mr. Coppola said in an interview.
GI Partners, based in Menlo Park, Calif., has $4 billion in capital under management. Among other ventures, it created Digital Realty Trust Inc., a real estate investment trust owning data centers and other technology-oriented real estate that sold its first public stock in 2004. The GI Partners fund buying the FlatIron Crossing stake, GI Partners Fund III LP, has $2 billion in capital commitments from pension funds such as the California Public Employees Retirement System and California State Teachers’ Retirement System.
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