In one of the biggest individual transactions lately by a real estate investment trust, Santa Monica-based Macerich Co. has bought the 927,000-square-foot Stonewood Mall in Downey for $92 million.
Macerich, which reported improved quarterly financial results last week, tends to close fewer but larger deals than many of the other local REITs because it specializes in buying regional shopping malls as opposed to the smaller office, industrial and apartment buildings that are the bread-and-butter of some other local REITs. Macerich deals typically run about $75 million to $100 million.
The Stonewood Mall deal marks the 14th regional mall Macerich has acquired since going public in March 1994. The Macerich mall portfolio contained about 10 million square feet when the company went public, and it now contains more than 21 million square feet, according to Thomas O’Hern, senior vice president and chief financial officer.
O’Hern said the Stonewood Mall, at the intersection of Lakewood and Firestone boulevards in Downey, is considered a “super regional” mall, the designation given to any mall larger than 800,000 square feet.
O’Hern said the purchase was a “privately negotiated” deal, meaning Macerich dealt directly with the owner, Stonewood Center Ltd., and didn’t use a brokerage firm. Nor did the seller send out a call for bids, as many property owners do, O’Hern added.
“We’ve known the seller for a long time, and both parties knew we could close the deal quickly if we just dealt directly with each other,” he said.
O’Hern said acquisitions were a primary reason Macerich’s revenue and net income rose in the second quarter. For the quarter ended June 30, Macerich reported revenues of $52.4 million, up from $38.1 million in the second quarter of 1996. Funds from operations (FFO) increased to $20.1 million from $14.9 million in the like year-earlier period. FFO per share was 53 cents, compared with 47 cents a year earlier.
Analysts typically gauge REIT financial performance by FFO rather than net income due to the nature of REITs’ assets. FFO includes net income plus allowances for depreciation and amortization.
Apartments sizzle
How hot is the market for fully leased apartment buildings in Los Angeles?
“Sizzling,” according to broker Ron Harris of Marcus & Millichap Real Estate Investment Brokerage Co.
Two complexes that Mutual of New York sold recently brought prices reminiscent of those being paid in the late 1980s, and each property drew more than 30 offers.
Harris said buyer Mark Jen, representing a family investment partnership, paid $10 million for the 203-unit Pacific Pointe complex at Burbank Boulevard and Colfax Avenue in North Hollywood. Beverly Hills-based investor Richard B. Francis paid $6.7 million for the 67-unit Chelsea Court apartments on Rossmore Avenue across from Wilshire Country Club, Harris said.
Those prices translate to more than $49,000 a unit for the North Hollywood property and $100,000 a unit for Chelsea Court.
“It was like back to 1988,” Harris said of the deals. Although the properties were only on the market three weeks, the North Hollywood complex drew 35 offers and Chelsea Court drew 31.
“We hoped maybe we’d get a dozen offers on each one,” said Harris, who represented MONY on the deals. “A year ago, I don’t think we would have had anywhere near this level of interest.”
Harris said the bidders included “a couple of REITs, some offshore syndicators,” and about 15 or 20 of the most recognizable names among L.A. apartment investors.
Despite the premium prices, which Harris called “higher than we’ve seen in a lot of years,” he said the per-unit prices were still lower than those of the market peak in the late 1980s. At the market peak, the North Hollywood property would have fetched $60,000 a unit and Chelsea Court would have gone for $120,000 a unit, he said.
For rent in Venice
The buyer of a Venice office center is hoping that the advertising, entertainment and other creative industry tenants will lease up about 30,000 square feet of space that formerly was occupied by architects and at one time, a grocery store.
Buyer Pacifica Capital Group believes the creative types will be attracted to the high ceilings and wide open spaces of the now empty building in the 175,000-square-foot center, formerly known as Washington Square, according to Steve Solomon of the Westwood office of The Seeley Co., a broker in the deal.
Steve Ohren, president of Pacifica Capital, which paid $27 million for the center, has renamed the center Pacifica Square and is marketing it to the creative businesses that have been moving into parts of Venice and nearby Santa Monica. The five-building property at Washington Boulevard and Via Dolce in Venice is 71 percent leased, Solomon said, but he says pending deals could bring that up to 95 percent by the end of this month.
Contrarian buy
El Segundo-based Highridge Partners has bought one of France’s largest home builders for approximately $25 million in what Steve Berlinger, a Highridge co-manager partner, referred to as another of the company’s typically contrarian investments.
Highridge acquired Marignan Immobilier Investissements, a home builder with $250 million in 1996 revenues, from French bank Credit Foncier de France in a deal that was financed by Deutsche Bank AG, according to a company announcement.
Berlinger said the deal qualifies as contrarian because the French real estate industry is about where the Southern California market was in 1992 and 1993. A protracted slump has driven lots of builders out of business, and the company Highridge bought only recently became profitable again after a money-losing year in 1996, he said.
But Berlinger said Marignan Immobilier Investissements “is doing exceptionally well” this year in what Highridge believes is a market that has started to recover after hitting bottom. Highridge already owns home builder Western Pacific Housing, which Highridge expects will sell $200 million worth of houses this year in California. The company’s founders include Eugene Rosenfeld, a former president of big home builder Kaufman & Broad Inc.
Acquisition flurry
Beverly Hills-based Arden Realty Inc. said it spent $111 million in closing eight of the nine pending building acquisitions listed in its prospectus for its recent secondary offering. That offering of 13.75 million shares raised $360 million. The eight properties that closed are in Los Angeles, Orange and Ventura counties and were purchased for prices ranging from $4.5 million to $28.3 million. The only acquisition yet to close is the 282,000-square-foot building at 1100 Glendon Ave. in Westwood, known also as the Monty’s building for the top-floor restaurant there. That deal is expected to close by the end of September for a price just under $50 million, Arden said.
Kilroy to buy more
El Segundo-based Kilroy Realty Corp. plans to spend $57.5 million for eight office and industrial properties in Los Angeles, Orange, San Diego, Santa Clara and Placer counties, according to a prospectus for Kilroy’s secondary offering of 10 million shares. The properties range from a $1.7 million industrial building in Tustin to a $16 million industrial property in Roseville.
Contributing reporter Bob Howard writes on real estate for the Los Angeles Business Journal.
