Owner offering mall property for $78.5 million SECURITY SQUARE ON THE BLOCK

October 19, 1994|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

The owner of the Security Square Mall is offering to sell the property for $78.5 million at a time when regional malls are rebounding from their relatively poor performance of the past few years.

The sale of the 1.04 million-square-foot mall, by JMB Institutional Realty Corp., would be the largest transaction involving a Baltimore-area shopping center in at least five years.

JMB, a Chicago-based pension fund adviser and developer, is one of the nation's largest commercial real estate investors, with portfolio exceeding $14 billion. The company also is one of the nation's largest property managers, controlling more than 55 million square feet of retail space.

JMB last month retained New York investment house Lazard Freres & Co. to prepare an investment package on the mall, a copy of which was obtained by The Sun.

In the confidential offering package, JMB reports that the property, at 6901 Security Blvd. in Woodlawn, is expected to produce revenues of $10.1 million this year and cash flow after debt service of $3.9 million.

The 76-acre project is subject to a $36 million mortgage issued in January by CIGNA Real Estate Investment Inc.

Neither JMB Realty nor Lazard Freres officials returned telephone calls for comment.

JMB Realty's efforts come at a time when various retail analysts and institutional investors have once again begun favoring malls, based on the general economy's uptick and increases in consumer confidence.

"Regional malls are in great demand now," said Whitney H. Wilcox, a managing director of Legg Mason Realty Services, the real estate arm of Legg Mason Inc. "Malls have performed better than many other asset classes of late, and lots of institutional investors like malls with a traditional merchandise mix that serves a solid, middle-market trade area."

Mall sales nationally increased 2.2 percent during the first six months of 1994, according to statistics compiled by investment house Salomon Bros. Inc., amid heightened competition from discounters such as Wal-Mart Stores Inc., catalog operators and home shopping networks.

Based in part on the increases, Simon Property Group in August announced plans to acquire 19 regional malls in a $1 billion deal with the Equitable Cos., part of the Indiana-based real estate investment trust's attempt to augment its 114-property portfolio.

Mr. Wilcox added that mall-dominated REITs -- such as Simon, DeBartolo Property Group and Taubman Centers Inc. -- that require continuous acquisitions to maintain dividend projections are likely to be targeted to buy Security Square.

The 22-year-old mall is anchored by department stores Hecht's, Montgomery Ward, Sears, Roebuck & Co. and J. C. Penney & Co. Those four had combined sales last year of $113 million, while the mall's other 116 stores produced sales of $43.7 million, a 50 percent jump from 1988. In the first quarter, sales there were up 3.6 percent over the comparable 1993 period.

JMB anticipates the mall will produce an average 10-year return of 9.8 percent, according to the package. By 2005, revenues are slated to rise to $15.7 million, while cash flow will increase to $6.02 million.

Security Square represents JMB's last retail holding in the Baltimore area. In July 1993, a JMB affiliate sold its limited partnership interests in the Owings Mills and White Marsh malls to The Rouse Co.

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