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Retail Investment Forecast -- 1998

Shopping center owners, lenders and analysts anticipate few rough spots for retail real estate investors in 1998, hinting that the 1997 transactions pace could be surpassed.

Retail REITs are busily buying and building -- and enjoying high rates of return in the process. Lenders are ready, willing and able to pony up the debt dollars to make shopping center deals work. Sellers of regional malls are getting top dollar for their centers -- if it's top-of-the-line product in strong markets -- and buyers are paying dearly for the cash flows these centers generate. Meanwhile, grocery-anchored strips are now viewed by many as a relatively safe investment haven in a volatile global economy.

After experiencing the one-two punch of high levels of new construction and consolidation in the ranks of tenants, the retail real estate investment market came back on track in 1997. And, judging by the comments of a number of major players in the industry, the outlook for 1998 is positive -- for most of the retail product types.

Some are cautious ... Investing in retail real estate has not been a pastime for the faint of heart in recent years. "The retail property sector has been the most volatile during the recovery phase of the current real estate cycle," according to San Francisco-based Marcus & Millichap's recent National Investment Market Update. "The upsurge of new construction in 1995 and 1996, coupled with a weakening demand for space, lowered the total rate of return and raised investor cautiousness," the report notes.

Performance among retail property types varies, according to the report. "Existing infill, anchored neighborhood and strip centers are benefiting from strong demand, limited supply, and significantly higher stability," it continues. Meanwhile, "regional malls and power centers remain vulnerable due to industry consolidations and an increasingly competitive retail environment."

Some are downright gloomy in their assessment of retail as an investment. For 1998, respondents to ERE Yar-mouth's/Real Estate Research Corp.'s Emerging Trends in Real Estate 1998 survey ranked regional malls and power centers last among virtually all real estate investment categories. "As in last year's survey, the inter-viewees 'think retail has bottomed ... maybe,'" notes Emerging Trends. Respondents felt better about grocery-anchored community centers, the report adds, "but with no great enthusiasm."

.. while others aren't Reasonable people can disagree about a lot of things -- including the status of retail real estate. "Frankly, retail has done a hell of a lot better than anyone anticipated," says Clint McDonnough, national director of REITs for E&Y Kenneth Leventhal Real Estate Group, Dallas.

"A year or two ago, we thought the retail real estate market was going to hit some difficult times, because the retailers themselves were not doing well," he notes, "and there was also some concern about the rise of on-line shopping via the Internet." And while retail real estate as a whole has not turned in the same kind of performance as other property types, says McDonnough, "the grocery-anchored community center has done very well and is very popular among investors."

At least one set of statistics backs up McDonnough's contentions. According to figures from the National Association of Real Estate Investment Trusts (NAREIT), the total return of retail REITs in 1997 was 16.99 percent vs. 18.86 percent for all REITs. By specific product types, REITs focusing on strip centers turned in a 21.44 percent return for the year, according to NAREIT, followed by those specializing in regional malls (13.69 percent) and outlet centers (.88 percent).

REITs are certainly not restrained in their appetite for retail product. "1997 was a watershed year in terms of retail acquisitions by REITs," says Gary Boston, REIT analyst for PaineWebber, New York. REITs are now the big buyers of retail real estate, he notes. "On a dollar basis, they did $7 billion worth of acquisition in 1997 -- double what they did in 1996."

Retail, particularly in the form of grocery-anchored strip centers, competes well with other asset classes, according to Jim Grissett, principal of The Parthenon Group, Atlanta. The price REITs and other investors pay for the cash flows these centers throw off, measured in terms of cap rates, are more attractive than those in the currently hotter office and hotel sectors, he notes.

"At the end of the day, the going-in cap rates for the bulk of strip center acquisitions are not as aggressive as those for office and hotel properties, where we are seeing them go as low as 7 percent," says Grissett. Strip center cap rates typically fell in the 9 3/4 to 10 1/4 range a year ago, he notes, "and over the past 12 months, we've seen them come down 100 or so basis points."

Prices paid for retail properties have been rising, according to Gregory R. Greenfield, executive vice president of ERE/Yarmouth, Atlanta. "In the past couple of years, as the real estate market as a whole has 'reflated,' there has been some recovery in the pricing of retail assets," he says.

This rebound has been largely the result of more capital becoming available for general real estate investment, says Greenfield. "At the property level," he notes, "this has not been accompanied by a marked degree of improvement in operations," making rising sale prices "more of a capital availability, as opposed to an operating phenomenon." Overall, "there is still some upside available at the property operating level," adds Greenfield, "which serves to make shopping centers an attractive investment."

The increase in available capital for real estate is encouraging shopping center sales, according to Christopher Niehaus, managing director of Morgan Stanley Realty, New York. "What has happened is that the retail sector has been somewhat out of favor for the past three years," he notes.

At the same time, "there has been a fairly substantial amount of pent-up demand to sell retail properties, particularly on the part of pension funds and other institutions that want to get out of direct ownership of real estate," says Niehaus. Improvement in the public capital markets "has made enough capital available on the buy side to allow an increase in the number, pace and volume of shopping center sale transactions."

Fritz McPhail, senior associate with Marcus & Millichap's Atlanta office, also points to a plentiful supply of capital. "And there is a lot more money than there is good retail product," he notes, "which is having the effect of driving up prices."

On the lending side, "funds are absolutely readily available for retail," according to Arthur Y. Sonnenblick, managing director of the New York-based investment banking firm of Sonnenblick-Goldman Co. Retail is what Sonnenblick calls "a priority item" for lenders in today's marketplace.

"Over time, retail is relatively stable," he says, "and its bases of tenancy and sales give investors tangible factors they can take a good look at."

San Francisco-based Nomura Capital has been actively lending on transactions involving most categories of retail product, according to managing director Dave Murdoch. "A-quality malls are selling at very low cap rates, and are very attractive from a debt financing perspective," he notes. Older malls in good markets are considered higher risk, but viable investments "if the anchors are having reasonably good sales and are committed to the location."

Meanwhile, strip centers are in favor with lenders, says Murdoch, because the wealth of grocery store and drug chains that typically anchor them "have higher concentrations of strong credit tenants" than other retailer groups.

Mall's flexibility is favorable "The overall retail climate is the best it has been in the past five years," says Robert Michaels, president of Chicago-based General Growth Properties. "The retailer bankruptcies of the past have created a stronger tenant base for malls today than existed previously," he says. Overall, "I am very optimistic about retail in general and regional malls specifically."

The regional mall is a sound investment choice, says Herb Glimcher, chairman of Columbus, Ohio-based Glimcher Realty Trust. "A mall serves as a town center, a focal point for many communities," says Glimcher. "A good mall these days is as good an investment as any around."

As of now, "About 30 percent of all malls are owned by public companies -- and we expect that figure to rise to 50 percent and greater over the next three to five years," says Morgan Stanley's Niehaus.

And the companies buying malls are paying more for the cash flows they generate, according to Boston of PaineWebber. "We're seeing cap rates as low as 8 percent on mall purchases, sometimes in the mid-9 percent range," he reports, "definitely down from a year ago, when cap rates were north of 10 percent."

Malls developers are always busy putting together the right array of stores in what can be a fickle marketplace. "The consumer is the ultimate judge," says Michaels. "What the consumer wants in a mall shopping experience is safety, selection, value and entertainment."

Today, that translates into malls with "much less ladies' ready-to-wear and more unisex clothing," says Michaels. "We are also seeing more sit-down restaurants, along with multiplex, state-of-the-art, stadium-seating theaters. All of this is in response to a consumer that is demanding change."

Entertainment is an important component of the regional mall, according to Lee Wagman, president of San Diego-based TrizecHahn Centers. "Today's high-disposable-income consumers are looking for outlets for entertainment as part of the shopping experience," he notes. Strong entertainment components can be an important differentiator for malls, says Wagman, "especially in markets where there are more than enough regional malls."

A lot of people are jumping on the entertainment bandwagon. "During the next two years, movie theaters, 'eater-tainment' concepts, and retailers with an entertainment focus will continue to expand," according to a recent forecast by Northbrook, Ill.-based Grubb & Ellis. But, "There will be an increasing number of failures as well." Over the long term, the report adds, "Entertainment could turn out to be the festival retailing of the 1990s; a hot concept in the right location, but not a 'one-size-fits-all' solution." (See also, Shopping Center World, January 1998, "That's Entertainment.")

Retailing, in regional malls as elsewhere, is an ever-changing business, adds Michaels. "Retailers are listening to the consumer much more now, and constantly adjusting their formats accordingly."

In at least one way, the constant reformatting/reconfiguring many retailers are going through is making life easier for regional mall developers, says Wagman. "It gives us a greater number of anchor stores to deal with," he notes. "Eddie Bauer, for example, used to be a 5,000 sq. ft. store within a mall, but it can assume a new role in its new, 35,000 sq. ft. format."

A massive level of regional mall development is not on the horizon in the near term, says Michaels. "I think there will be very few new regional malls developed," he says. "There is just not that great a need, except in a few niche markets."

Overbuilding in the regional mall sector is not a problem, Wagman notes. "Most of the new development in the past seven or eight years has been in the form of big-box power centers," he explains, "while there have been only a handful of new regional malls."

Neighborhood strips tagged stable "Retail is overbuilt in bad locations," adds Herb Glimcher. "Good locations are never overbuilt."

An oversupply of product is not a problem in the strip/neighborhood/community center sector, according to Scott Wolstein, chairman, CEO and president of Cleveland-based Developers Diversified Realty Corp.

"Many people get confused, thinking of retail square footage as a commodity like office space or multifamily units," says Wolstein. "Just because you have an 'oversupply' of retail square footage in a market doesn't mean that a good shopping center is going to have high vacancies."

In reality, retail is much more location-specific. "Retail locations are not fungible -- a retailer is not necessarily going to do the same business at one center it can at another," says Wolstein. "If a property is well-positioned in terms of tenants, access, visibility and location, we feel it can perform well -- no matter if the market is over- or under-supplied."

"You have to take into account the fact that obsolescence occurs in the retail marketplace," says Ken Bernstein, COO of New York-based RD Capital, an owner/investor in strip shopping centers. "Not every square foot of retail that has been built in the past 20 years is still in commission or even viable."

In a retail investment marketplace that views retail on the whole "as relatively risky but offering a better reward than office or hotels," the neighborhood strip center offers a somewhat more comfortable niche, says Bernstein. "With power centers and malls continuing to go through a process of evolution -- or maybe even revolution -- the neighborhood strip sector appears to be more stable."

In today's strip center investment marketplace, "investors need to be careful," adds Bernstein. "Cap rates continue to come down for quality assets, and sellers are often asking buyers to buy based on projected, instead of current, cash flows, and take other risks not previously required."

Even in this relative safe haven, "there are some tricky issues to deal with," says Bernstein. He anticipates consolidation over the next year among the grocery store chains that typically anchor these centers. "The competition in most markets is intense, occupancy costs are growing significantly, and margins are getting tighter," Bernstein says, adding that "things may well start to get complicated."

One segment of the strip-center market that deserves more investor interest is the 50,000 to 75,000 sq. ft., unanchored, locally tenanted strip center, according to Clint McDonnough. "These can be bought at very attractive cap rates, from 14 to 15 percent," he notes.

Although these centers can be fairly management-intensive, they are usually well-leased with service-oriented businesses such as insurance offices and dry cleaners, explains McDonnough. "If you are willing to put up with the headaches that come with smaller tenants and shorter leases, there are some good returns to be had."

The big-box anchored cousin of the neighborhood strip center, the power center, has not been faring well in the investment marketplace. "The market for power centers is definitely softening," says Fritz McPhail. "Investor demand for these large, multi-big-box anchored centers just isn't there now."

Disarray in the ranks of the big-box retailers has spelled trouble for many power centers, according to ERE Yarmouth's Greenfield. "This sector has been under the pressures associated with the fallout among the big boxes," he notes. As a plethora of big boxes with similar concepts "have beaten each other into submission, only the strong power centers in great locations have survived."

"That's why we have steered clear of power centers for the past couple of years," adds Boston. "There is some more consolidation coming among the big-box retailers -- and when that happens, I don't think you want to be an owner of a power center." Vacated big-boxes can be extremely difficult to re-lease, notes Boston. "For example, a vacated Incredible Universe store leaves behind a 160,000-square-foot box. Not many retailers can utilize that kind of space, and subdividing it is an expensive proposition for a landlord."

1998 will be a good year "A number of large portfolios are either on or coming to the market, so I think you will see a lot of transaction volume," says Greenfield. The REITs are in the market to stay, and pension funds may well make a comeback in the retail investment arena, he says.

Greenfield anticipates that "the volatility associated with foreign investment, particularly in Southeast Asia, will hit home this year." As one of the results, "A lot of investors will look at real estate as a bastion of stability, in what will be a volatile year in other sectors."

"The retail real estate business will experience some pretty stable times in 1998," says McDonnough. "We will still see some strip center construction," he notes, along with "a repositioning in many markets, where older centers are refurbished and retenanted."

"Things look fairly stable for the retail sector," says Boston. "I have some concerns about new supply coming on line, and as always in retail, there are some tenant bankruptcies on the horizon." Within the retail spectrum, "Malls, which can be very flexible on how they use space, and grocery-a nchored strips, with their necessity-based retailers, will both serve as niches that can cushion investors from the vagaries of the rest of the retail industry."

The outlet center sector has been a relatively poor performer of late, but that could change, according to The Parthenon Group's Grissett. "If we do go into an economic down-cycle in 1998," he notes, "the outlet mall concept is going to sound and smell pretty good -- with more merchandise pushed into these centers and a return to real off-price retailing."

"We will continue to see improvement in all retail product types," says Craig Johnson, director at Irvine, Calif.-based Belgravia Capital, "in terms of cap rates staying relatively stable while prices go up." In the lending marketplace, he adds, "anchored retail has stabilized when it comes to loan pricing."

"We are very bullish," says Wagman. He sees nothing on the horizon that should be of concern to the retail industry. "If a recession occurs and disposable income drops, that will of course hurt everybody," he notes, adding that other real estate asset classes will suffer more in a recession than retail.

In retail, he explains, "You are usually dealing with long-term leases -- and barring a Chapter 7 bankruptcy, tenants are going to pay their rent, even if their sales drop a bit."

A number of things could upset today's generally upbeat retail scene in the coming year, says Bernstein, including a rise in interest rates and stock market turmoil. "The wonderful interest rate environment we are now enjoying is sustaining a lot of product -- and if that were to change, we would see a dampening in the market," he notes.

A drop in the stock market could also have a negative impact, says Bernstein, "although real estate seems to enjoy a certain amount of lag time when it comes to feeling the impact of market swings." Also, "One more major retailer setback could make the capital markets to back away from retail."

1998 should be a good year for the retail real estate investment market, "but there's a big question mark in place for 1999," says McPhail. 1998 is a year for investors in retail real estate to "window dress" their portfolios, he notes. "We are clearly at the top of the market."

"If you are an astute owner of properties, you want to look at your portfolio and see if you have any centers that you wouldn't want to own during a recession," he explains. "And if there are, you need to sell them this year, as opposed to later."

The following were among the major corporate mergers of 1997:

Lend Lease Corp., Sydney, Australia, purchased Atlanta-based Equitable Real Estate (ERE) Investment Management, a subsidiary of The Equitable Cos. Inc., New York. The $400 million transaction brought Lend Lease's total retail assets to 120 million sq. ft. managed. Lend Lease combined ERE with New York-based The Yarmouth Group, also owned by Lend Lease. The acquisition included ERE's investment management business as well as the property management and mortgage divisions of ERE Subsidiary COMPASS Retail Inc., and ERE Rosen, a REIT portfolio management firm. The combined companies operate under the name ERE/Yarmouth.

Pennsylvania Real Estate Investment Trust, Fort Washington, Pa., acquired The Rubin Organization Inc., Philadelphia, as well as interests in four existing shopping centers and four potential shopping center developments in a transaction valued at an estimated $260 million. The new management company is called PREIT-Rubin Inc.

Baltimore-based Prime Retail Inc. and Norton Shores, Mich.-based Horizon Group Inc. finalized an agreement to merge. The transaction comprises an aggregate consideration of approximately $906.3 million, including the assumption of $540.4 million of Horizon debt. The merger, which is expected to close the first quarter of 1998, will bring Prime Retail's outlet center portfolio to 12.4 million sq. ft.

Greenwich, Conn.-based Starwood Capital Group and Westport, Conn.-based Ceruzzi Properties formed Starwood-Ceruzzi L.L.C. The new venture, which is based in Westport, will acquire and develop retail properties throughout the United States. Starwood-Ceruzzi L.L.C. is privately held but is planning to convert to a publicly traded REIT.

After peaking above 11 percent in 1996, the average cap rate for retail properties has begun a significant decline, reaching 10.3 percent in the third quarter. The evidence suggests that investors see this property type as having passed its cyclical trough.

The details of many of the major financial transactions relating to retail real estate are repeated here in our Transactions Recap '97. These deals were first published in an issue of Shopping Center World or on our website: InternetReview Online

DLJ Real Estate Capital Partners L.P., the real estate merchant banking fund of New York based Donaldson, Lufkin & Jenerette Inc., entered into a joint venture with Simon DeBartolo Group Inc., Indianapolis, to acquire more than $1 billion of entertainment-oriented real estate properties by 1999. The venture operates under the name Simon/DLJ Entertainment Properties Inc. L.P.

Affiliates of The Macerich Co., Santa Monica, Calif., acquired Valley View Center in Dallas for $85.5 million. The 1.6 million sq. ft. superregional mall, purchased from Chicago-based LaSalle Street Fund, is anchored by Foley's, Dillard's, Sears and JCPenney, and features more than 150 specialty stores and 17 restaurants.

Chattanooga, Tenn.-based CBL & Associates Properties Inc. acquired Westchester Mall in Cortlandt, N.Y. The 120-acre site was reconfigured to create Cortlandt Town Center, a 769,000 sq. ft. power center to be anchored by Wal-Mart, Home Depot, A&P supermarket, Nobody Beats The Wiz, HomePlace, United Artists and Barnes & Noble.

Columbus, Ohio-based Glimcher Realty Trust and Nomura Asset Capital Corp., New York, acquired The Mall at Johnson City in Johnson City, Tenn., for $44 million. The center is anchored by Sears, Proffitt's Store for Men, Kids & Home, Proffitt's for Her, JCPenney and Goody's.

Cloverleaf Mall in Richmond, Va., was acquired by Zamias Services Inc., Johnstown, Pa., from LaSalle Advisors, a subsidiary of Chicago-based LaSalle Partners, for an undisclosed sum. The 762,000 sq. ft. mall, which was renovated three years ago, is anchored by JCPenney, Hecht's and Sears. Zamias Services will manage the property.

General Growth Properties Inc., Chicago, acquired Sooner Fashion Mall in Norman, Okla., and a 50 percent interest in Quail Springs Mall in Oklahoma City from Prime Property Fund, a pooled pension account managed by Atlanta-based Equitable Real Estate Investment Management Inc. The aggregate consideration of the acquisition was approximately $52 million, consisting of approximately $25 million in General Growth stock, $18 million in cash, and the assumption of approximately $9 million of debt.

General Growth Properties Inc., Chicago, acquired three regional malls -- Lansing Mall in Lansing, Mich.; Lakeview Square in Battle Creek, Mich.; and Westwood Mall in Jackson, Mich. -- from a private investor group led by Forbes/Cohen Properties, Southfield, Mich., for approximately $134 million.

Chattanooga, Tenn.-based CBL & Associates Properties Inc. acquired two shopping centers, bringing the company's portfolio to more than 20 million sq. ft. St. Clair Square, a 1 million sq. ft. superregional mall in Fairview Heights, Ill., was purchased for $86.4 million from Prudential Real Estate Investors, Short Hills, N.J. Sutton Plaza, a 122,027 sq. ft. community center in Mount Olive, N.J., was acquired for $5.7 million from Pasbjerg Development Co., Short Hills, N.J.

Boston-based Fleet Financial Group provided $260 million in construction financing to Providence Place Group L.P., Providence, R.I., for Providence Place Mall in Providence, R.I. Ground was broken in March for the 1.36 million sq. ft. superregional center, which will be anchored by Nordstrom, Lord & Taylor and Filene's. Commonwealth Development Group L.L.P., Boston, will manage the development of the mall.Des Moines, Iowa-based Principal Mutual provided long- term, fixed-rate loans totaling $127 million to CBL & Associates Properties Inc., Chattanooga, Tenn., for two of its regional malls: Hamilton Place in Chattanooga and Westgate Mall in Spartanburg, S.C.

Pan Pacific Development Inc., Vista, Calif., purchased Chico Crossroads in Chico, Calif., for $20.4 million. Sold by Chico Crossroads Center Ltd., Beverly Hills, Calif., the 267,000 sq. ft. power center features Home Base, Office Depot, Food 4 Less, Circuit City, Barnes & Noble, and Petco.

Cleveland-based First Union provided $33.4 million in first mortgage financing to San Francisco-based Potrero Center L.P. for Potrero Center in San Francisco. The 226,646 sq. ft. shopping center is anchored by Safeway, Ross Dress For Less, Super Crown Book, Office Depot and Old Navy Clothing Co. The transaction was negotiated by the Los Angeles office of New York-based Sonnenblick-Goldman Co.

New York Life Insurance Co., New York, provided $35 million in permanent financing to Coconut Grove, Fla.-based Dadeland Station Associates for Dadeland Station in Miami. The three-level, 314,500 sq. ft. power center features Target; Sports Authority; Bed, Bath & Beyond; Michael's and Best Buy. Aztec Group Inc., Miami, brokered the transaction.

ROSCHE Finanz, Freiburg, Germany, acquired The Meridian retail complex in downtown Seattle from Maple Grove, Ill.-based TOLD Development Co. for $78 million. The 61,000 sq. ft. urban entertainment and retail project includes Nike, Planet Hollywood, Levi's, ObaChine restaurant, SEGA Gameworks and a 16-screen Cineplex Odeon theater.

New York-based Lehman Brothers Holdings Inc. provided $170 million in non-recourse, floating rate refinancing to Urban Water Tower Associates L.P. and institutional clients of Chicago-based Heitman Capital Management Corp., for Water Tower Place in Chicago. The 822,000 sq. ft. mixed-use project features Lord & Taylor and Marshall Fields. The transaction was co-arranged by Heitman Finance Group and Urban Shopping Centers Inc., both of Chicago.

Cary, N.C.-based FAC Realty Trust Inc. acquired five North Carolina community centers from Raleigh, N.C.-based North Hills Inc. for $32 million.

The Bank of Montreal in Montreal, Canada, sold 1 million sq. ft. Manhattan Mall and Childrenswear Center in New York, to Andrew Penson, a private real estate investor backed by New York-based Lehman Brothers Holdings Inc. The nine-story, vertical mall is anchored by Sterns and The Childrenswear Center office complex. The $135 million transaction was negotiated by New York-based Granite Partners Inc. Manhattan Mall will continue to be managed by Indianapolis-based Simon DeBartolo Group Inc.

San Diego-based Burnham Pacific acquired four California retail properties for $78.9 million. The properties are Santa Fe Springs Plaza in Los Angeles, Central Shopping Center in Ventura, Crenshaw/Imperial Shopping Center in Inglewood and the majority of Fremont Hub Shopping Center in Fremont. Crenshaw/Imperial Shopping Center was purchased from Los Angeles-based Rubin Pachulski L.P., while the remaining properties were purchased from San Francisco-based BRE Properties Inc. The transaction encompasses 870,458 sq. ft.

New York-based Metropolitan Life Insurance Co. provided $92.1 million in permanent mortgage loans for two Atlanta superregional malls. Atlanta-based Cobb Place Associates L.P. has received $51.6 million for Town Center at Cobb (1.3 million sq. ft.) in Kennesaw, Ga. Atlanta-based Gwinnett Place Associates L.P. has received $40.5 million for Gwinnett Place Mall (1.2 million sq. ft.) in Duluth, Ga. Both centers are anchored by Rich's, Macy's, Sears, Parisian and JCPenney. The transactions were arranged by Atlanta-based Wilson & Nolan.

Seafirst Bank and Washington Mutual Bank, both based in Seattle, and Washington, D.C.-based Multi-Employer Property Trust provided $127 million to Seattle-based Pine Street Development L.L.C. for the construction of Pacific Place in downtown Seattle. The 335,000 sq. ft. shopping center will feature Pottery Barn, Williams-Sonoma Grande Cuisine, Gordon Biersch Brewing Co. and an 11-screen General Cinemas complex when it opens in September 1998.

Chicago-based Urban Shopping Centers Inc. acquired interests in two shopping centers: San Francisco Centre in San Francisco and Copley Place in Boston. In a $31 million cash transaction, Urban purchased a 50 percent preferred interest in San Francisco Centre. The seller, a private investor group led by H. Patrick Hackett Jr. and Okla Basil Mead Jr., will retain a 50 percent interest in the property for approximately eight years, after which Urban will acquire the remaining interest. The $42.3 million Copley Place transaction will be payable through the issuance of 1 million units of partnership interest in Urban Shopping Centers L.P to the seller, Chicago-based JMB Realty Corp. The remaining interest in the property is owned by Overseas Partners Capital Corp., a wholly owned subsidiary of Bermuda-based Overseas Partners Ltd. Linthicum, Md.-based Mid-Atlantic Realty Trust (MART) has entered into a contract to acquire nine retail and two office properties in the Baltimore area from affiliates of The Pechter Group, Towson, Md.

Munich, Germany-based Kan Am joined The Mills Corp., Arlington, Va., and Wood-Ridge, N.J.-based Empire Ltd. as an equity partner in Meadowlands Mills. Under the terms of the agreement, Kan Am provided two-thirds of the pre-development and project equity in return for one-third ownership. The 2.1 million sq. ft., superregional value retail/entertainment development will open in Carlstadt, N.J., in 2000.

Albany, N.Y.-based New York State Teachers' Retirement System and New York-based Metropolitan Life provided a $220 million, fixed-rate loan to The L&B Group, Dallas, for Tysons Corner Center in McLean, Va. The 1.9 million sq. ft. superregional center is anchored by Bloomingdale's, Hechts, JCPenney, Nordstrom and Lord & Taylor. The transaction was arranged by Houston-based L.J. Melody & Co.

Montreal-based Ivanhoe Inc. acquired substantial interest in Towne Mall in Elizabethtown, Ky., from Chicago-based Heitman Capital Management Corp. for approximately $20 million. The regional mall is co-owned by Wilmorite Inc., Rochester, N.Y. Center operations will be supervised by Wilmorite-Ivanhoe Property Management L.L.C., a company jointly owned by Ivanhoe and Wilmorite.

Chicago-based General Growth Properties acquired a 50 percent ownership interest in Town East Mall in Mesquite, Texas. The purchase was made from San Francisco-based Atlantic Freeholds II for an aggregate consideration of approximately $56.5 million, consisting of $28.5 million in cash and the assumption of approximately $28 million of debt. The 1.2 million sq. ft., two-level, enclosed mall is anchored by Dillard's, Foley's, Sears and JCPenney. General Growth Management Inc. will continue to manage the center.

Chicago-based City Center Retail Trust/McCaffrey Interests purchased Mazza Gallerie in Chevy Chase, Md., for $28 million. Sold by a joint venture between The Prudential Realty Group, Parsippany, N.J., and London-based British Petroleum Pension Fund, the 270,000 sq. ft. specialty center is anchored by Neiman Marcus. The transaction was brokered by Los Angeles-based CB Commercial Real Estate Group Inc.

Salt Lake City-based JP Realty Inc. purchased Visalia Mall in Visalia, Calif., from Hartford, Conn.-based CIGNA Insurance Co. The $38 million acquisition was financed using $37.6 million of JP Realty's revolving credit facilities and proceeds from a property exchange. The 440,000 sq. ft. mall, which was recently renovated, is anchored by JCPenney and Gottschalks.

Los Angeles-based Westfield America Inc. entered into an agreement with Chicago-based General Growth Properties to acquire a 50 percent interest in Meriden Square in Meriden, Conn. The $54.5 million transaction was funded from Westfield's $600 million unsecured bank line of credit, established in conjunction with its public listing in May 1997. The two-level, 746,695 sq. ft. shopping center is anchored by Filene's, JCPenney and Sears.

Bethesda, Md.-based First Washington Realty Trust Inc. acquired Mitchellville Plaza in Prince George's County, Md., from Baltimore-based Enterprise Associates for $19 million. Consideration is being paid in a combination of cash, the assumption of existing mortgage financing and the issuance of equity units in First Washington. The 155,000 sq. ft. shopping center is anchored by Food Lion.

Florham Park, N.J.-based Gale & Wentworth Inc. sold Princeton Forrestal Village in Princeton, N.J., to New York-based Credit Suisse First Boston's Praedium Opportunity Fund II L.P. Gale & Wentworth will continue to lease and manage the 420,000 sq. ft., mixed-use project, which features WestPoint Pepperell, Corning Revere, Dansk and Casual Corner Outlet.

New York-based Lehman Brothers provided $26 million, fixed-rate, acquisition financing to affiliates of Retail Plazas Inc., Dallas and Toronto, for three Texas shopping centers. The Market at Cedar Hill (128,383 sq. ft.) in Cedar Hill is anchored by Super Kmart and Blockbuster Video; LBJ/Oates Summit Shopping Center (115,358 sq. ft.) in Mesquite is anchored by Albertson's, Eckerd Drug and Blockbuster Video; and Denton Center (300,154 sq. ft.) in Denton is anchored by Kroger, Drug Emporium and Russell's department store. The transactions were brokered by Dallas-based Holliday, Fenoglio, Dockerty & Gibson.

Columbus, Ohio-based Glimcher Realty Trust and New York-based Nomura Asset Capital Corp. acquired Philadelphia-based Catalina Partners L.P., owners of Colonial Park Mall in Harrisburg, Pa. Ownership interest in Colonial Park Mall was acquired for $48 million by Nomura and Glimcher in a 60/40 venture. Glimcher will lease and manage the 743,967 sq. ft., regional mall, which is anchored by Boscov's, Sears and Bon-Ton.

In a joint venture, Chicago-based General Growth Properties Inc. and Montreal-based Ivanhoe Inc. acquired two shopping centers from The Prudential Insurance Co., Newark, N.J. The Oaks Mall (907,932 sq. ft.) in Gainesville, Fla., is anchored by Dillard's, Burdines, Belk, JCPenney and Sears. Westroads Mall (1.2 million sq. ft.) in Omaha, Neb., is anchored by Von Maur, Younkers, JCPenney and Montgomery Ward. The centers were purchased for $206 million.

Chattanooga, Tenn.-based CBL & Associates Properties Inc. acquired Springdale Mall in Mobile, Ala., and Spartan Plaza in Spartanburg, S.C. Springdale Mall (926,376 sq. ft.) was purchased from Hartford, Conn.-based CIGNA for $26 million. Spartan Plaza (151,489 sq. ft.) was purchased from Boston-based PaineWebber for $4.4 million. It has been renamed WestGate Crossing.

Baltimore-based Prime Retail acquired two shopping centers -- Niagara International Factory Outlets (534,000 sq. ft.) in Niagara Falls, N.Y.; and Shasta Factory Stores (165,000 sq. ft.) in Shasta, Calif. -- from Buffalo, N.Y.-based Benderson Development Co. for $101 million.

Bethesda, Md.-based First Washington Realty Trust acquired six Chicago area shopping centers from Itasca, Ill.-based Dodi Property, for an undisclosed amount. The transaction was arranged by the Investment Sales Group of Oakbrook Terrace, Ill.-based Mid-America Real Estate Corp.

Myrtle Beach, S.C.-based WCI Management Group Inc. sold Outlet Park -- Shoppes at Waccamaw (800,00 sq. ft.) in Myrtle Beach to a joint venture comprising Stamford, Conn.-based GE Investment Management Inc. and New York-based Loeb Partners Realty. The seller was represented by Rosenthal-Shuler Realty Partners Inc., McLean, Va.

Southfield, Mich.-based Ramco-Gershenson Properties Trust has acquired 15 southeastern shopping centers (a combined total of 2.5 million sq. ft. of GLA) from New York-based DRA Advisors Inc. for $124.5 million.

Late in the year, Simon DeBartolo Group announced a joint venture with The Macerich Co. to buy 12 regional malls for $974.5 million from IBM's pension fund. Earlier in the year, Simon DeBartolo won the battle to buy the $1 billion Retail Property Trust, a private REIT with 12 regional malls.

Martin Sinderman is an Atlanta-based Freelance writer

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