Vervolg;
Potential Growth Focus
URW will keep malls where it thinks there is upside potential, where company officials "feel they could create additional value through redevelopment or lease-up of certain existing properties," according to Rudolph Milian, formerly with the ICSC retail trade group and now president and CEO of Woodcliff Realty Advisors,
"If they sell those malls now ... the [net operating income] is not there to warrant the additional value they can create through redevelopments, and particularly with adding other uses, such as multifamily, hotels, etc.," he told CoStar News in an email. "For example, a highly productive mall that bears very little risk with an extensive cash flow can be expanded through densification, which could add an extensive amount of NOI ... the value would rise tremendously. At that point, perhaps a couple of years or more, when the income is stabilized, they could sell the asset at a much higher value."
Milian, who is not directly affiliated with URW, said he expects the mall owner to keep its trophy property Westfield Garden State Plaza in Paramus, New Jersey, where it "has already received entitlements for multifamily and additional development opportunities."
National developer Mill Creek Residential "will lead the multifamily phase of that redevelopment with URW," Milian said. Westfield UTC in San Diego and the Old Orchard Mall in Skokie, Illinois, might also be considered long-term holds until those redevelopments are completed, he said.
Selling those properties now "is like leaving money on the table for a developer whose skills can create such value given the appropriate time frame," according to Milian.
"URW figures, 'Why give all this upside to another developer, such as Simon, Brookfield [Properties] or Macerich to later realize when the mall asset is already a very stable asset?'" he said.
URW also has a promising financial opportunity to keep malls where there is a significant rollover of leases in the next three years, according to Milian.
"This is particularly important for malls in the highest demand where their rent spreads, new rental terms compared to rental terms for expiring leases, are significant whereby URW can significantly increase income and thus value after those leases have been renewed or re-leased at current market rents," he said.
Shedding Ailing Properties
The highest priority for URW, according to Milian, is to sell any remaining distressed malls such as Westfield Valencia Town Center and Westfield San Francisco Centre, where the debt far exceeds the present value.
"Those divestitures would come from foreclosures or sale in lieu of foreclosure," he said.
Mall owner Unibail-Rodamco-Westfield has been in negotiations to sell Valencia Town Center in Santa Clarita, California. (CoStar)
URW has been in talks to dispose of Westfield Valencia Town Center at 24201 Valencia Blvd. in Santa Clarita, California, CoStar News has reported. And URW and its partner Brookfield have already stopped making payments on their $588 million loan on Westfield San Francisco Centre at 845-865 Market St., meaning that property will ultimately be surrendered to its lenders.
URW has divested several U.S. malls already. In March last year, the company sold a property slated for redevelopment, the Westfield Promenade Mall in the Woodland Hills area of Los Angeles, for $150 million. Then in August a year ago, it sold a suburban Los Angeles mall for the highest price paid for a U.S. retail property in years. The 1.5 million-square-foot Westfield Santa Anita at 400 S. Baldwin Ave. in Arcadia traded for $537.5 million.
Late last year, URW sold two properties for $196 million: Westfield Trumbull, a mall located at 5065 Main St. in Trumbull, Connecticut, and Westfield South Shore at 1701 Sunrise Highway in Bay Shore, New York.
In May, URW completed the $220 million sale of Westfield Brandon, a 1.15 million-square-foot mall at 459 Brandon Town Center Drive in Brandon, Florida. And in July, the landlord sold the Westfield Mission Valley Mall at 1640-1750 Camino Del Rio North in San Diego for $290 million.