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Back In Action

After several years of sitting out the acquisition market, Glimcher Realty Trust has jumped into action. In the last month, the Columbus, Ohio-based REIT closed on a $58.3 million deal to acquire the 927,000-square-foot Tulsa (Ohio) Promenade and spent $170.1 million on the 1.2-million-square-foot Puente Hills Mall in South Los Angeles County.

The company has been maligned by some for management missteps and its stock has generally underperformed compared with other mall REITs. But new management and a clear strategy seem to be paying off as evidenced by the willingness of Oxford Properties Group, a real estate company owned by the Ontario Municipal Employees Retirement System (OMERS) of Canada, to form a $200 million joint venture with the REIT.

“For me, the fact that a pension fund would have confidence in them is a non-Wall Street kind of recognition that they are doing the right things,” says Richard Moore, an analyst with Keybanc Capital Markets. Unlike many analysts, such as Prudential Equity Trust and Citigroup, which are more critical of the company, Moore is bullish on Glimcher. “Oxford didn't have to partner with them. They can joint venture with anyone or no one.”

The joint venture will likely spend its remaining funds on acquisitions and on shoring up some of Glimcher's existing properties. It has $90 million planned in redevelopments in its portfolio, which consists largely of “B” and “B-” properties. Both recent acquisitions fit Glimcher's plan to focus on lower-tier regional malls that it can upgrade and extract value from. Meanwhile it has divested itself of strip center assets.

The latest deal is advantageous for Glimcher because the REIT can earn a 7 percent return on its investment for Puente Hills plus an additional 40 basis points from management fees from the partnership. The “B-” California property will require an additional $10-million investment to bring it up to “B+” snuff. “With a little redevelopment and adding the right specialty retailers, we will have done an excellent job of entertaining consumers,” notes Linda Wadell, vice president of marketing for Glimcher.

Meanwhile, the Tulsa Promenade is a newly renovated regional mall, which is anchored by Dillard's, Foley's, JCPenney and Mervyn's, generates sales of approximately $305 per square foot.

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