Realty firm seeks to buy Towson mall

October 01, 1994|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

The nation's largest publicly held owner of community shopping centers is negotiating to purchase the troubled Towson Marketplace, one month after acquiring a key piece of the 43-acre project.

If completed, Kimco Realty Corp.'s plan would include investing roughly $20 million to redevelop and construct additional stores at the 545,000-square-foot mall. But those plans have snagged recently because of community opposition to the proposal, sources familiar with the talks said. A Baltimore County requirement stipulates that neighborhood organizations in the affected area must review any redevelopment.

Kimco, a New York real estate investment trust, has been working toward the estimated $13 million purchase with the Equitable Life Assurance Society of the United States, the mall's owner, since July. Equitable took possession of the retail center in May, after former owner Bramalea Centers Inc. defaulted on its $17 million mortgage.

Kimco obtained control of a key piece of the Towson Marketplace property in August, when it acquired land underneath a 34,000-square-foot Best Products store for $2.75 million. The store sits in the heart of the project and presents a formidable obstacle to any other redevelopment plan.

"We think it's a good redevelopment opportunity, a good piece of real estate that has a solid chance of being brought back," said Ed Senenman, Kimco's acquisitions director. "But it's a very delicate situation right now. We're working on it." Equitable Life officials declined to comment on the negotiations.

Kimco, which owns 155 neighborhood shopping centers totaling million square feet nationwide, specializes in redevelopment opportunities and has the financial muscle to take on such a project.

"That's what makes us unique," Mr. Senenman said. "But that project will require a lot of capital to reposition it, a lot of staying power."

Kimco earlier this year obtained a $100 million revolving credit line to finance new acquisitions, as well as redevelopment projects.

The company also has cash from a $350 million securities offering completed in September 1993. It converted to a REIT in November 1991, after a $116 million initial public offering.

Kimco owns just two properties in Maryland, a 115,328-square-foot center in Hagerstown and a 81,500-square-foot project in Laurel.

In the first half of this year, the REIT posted net income of $19.5 million on revenue of $61.2 million. Its assets as of June 30 totaled $682 million, and its total market capitalization topped $1.1 billion, said Mary Jane Rehman, the company's director of investor relations.

"There still seem to be investment opportunities in the type of property Kimco wants, the undermanaged or improperly maintained property with upside potential," wrote Alex. Brown & Sons Inc., a Kimco investment banker and REIT analyst, in August.

But Towson Marketplace represents a significant challenge, even for Kimco.

Although the 35-year-old mall's major tenants are Montgomery Ward & Co. Inc., Toys 'R' Us and Marshall's Department Store, its annual net operating income -- cash flow after expenses and excluding debt service -- is about $500,000, sources said, far less than the industry average for similar centers. Furthermore, many of the tenants have month-to-month leases, making long-term planning difficult.

At least a portion of Bramalea's problems with the former Eudowood Plaza stemmed from the short lease commitments and community opposition to additional stores, officials from the Canadian development firm said prior to relinquishing the center.

Unlike Bramalea, however, Kimco may well be aided by the general uptick in the economy and the bevy of value-oriented retailers such as Wal-Mart Stores Inc., Target Stores, Kmart Corp., and Best Buy Co., which have all been hunting for additional sites in the Baltimore area.

"Kimco could do a great deal with Towson Marketplace," said R. Dixon H. Harvey Jr., president of Black Rock Associates, a Sparks retail investor that at one time considered acquiring the mall.

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