Prime Retail, Rouse buy malls Shopping centers in N.Y., N.J., Calif. are added to holdings

Commercial real estate

December 04, 1997|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

In moves to expand their portfolios and market presence, two Maryland real estate firms announced major deals yesterday to purchase retail centers in New York, New Jersey and California.

Baltimore-based Prime Retail Inc. -- already poised to become the nation's leading factory outlet mall owner -- bought one of the most successful outlet centers in the United States, Niagara International Factory Outlets in Niagara Falls, N.Y., and a smaller center in Shasta, Calif., for $101 million in cash and assumed debt.

Rouse Co., in its first acquisition in more than a year, said yesterday that it has agreed to buy a regional mall in Burlington County, N.J., for an undisclosed amount. The transaction is expected to close this month.

Prime Retail's acquisition of the 534,000-square-foot Niagara center and the 165,000-square-foot Shasta Factory Stores will help solidify its position in the outlet industry, analysts said.

The real estate investment trust already was on its way toward becoming the dominant player. It announced last month that it will nearly double the size of its outlet mall portfolio by acquiring Horizon Group Inc. and its 20 retail centers for $900 million.

The Niagara outlet, with tenants such as Brooks Brothers, Calvin Klein and Off 5th-Saks Fifth Avenue Outlet, averaged sales of $270 per square foot last year, well above the industry average of about $210.

"They picked up a winner," said Mark Millman, president of Lutherville-based Millman Search Group, a retail consulting firm. "Everyone knows the property. Everyone wants to get in that property. They're picking up these centers and consolidating their position as the leading outlet developer in the world."

Prime Retail had been negotiating to buy the Niagara center and the smaller one in California from Benderson Development Corp., a Buffalo, N.Y.-based private developer of factory outlets and strip shopping centers -- long before the Horizon acquisition was announced, said William H. Carpenter Jr., Prime Retail's president and chief operating officer.

"It takes another competitor out of the business; that's part of our strategy of consolida- --tion," Carpenter said, adding that the outlets "fit into our portfolio and the quality of the real estate we like owning. It continues to keep us on track with our growth plan to be one of the dominant players in the industry."

The acquisition beat expectations of analyst David H. Tannehill, first vice president of Memphis, Tenn.-based Morgan, Keegan & Co., who had expected Prime Retail's acquisitions to total $85 million in the third quarter.

For Rouse, the planned purchase of the Moorestown Mall this month will help strengthen its presence in southern New Jersey, said David L. Tripp, a Rouse vice president.

Rouse owns three other enclosed regional malls in that area and three Philadelphia-area shopping centers.

"We have a fairly substantial commitment already in that area," Tripp said. "We know it very well. We think it's a good market area that longer term has good prospects."

He said the 258,000-square-foot mall, anchored by Strawbridge's, Boscov's and Sears stores, is 75 percent leased.

"We see some real potential in terms of being able to lease" the empty space, Tripps said.

Rouse's turnaround strategy includes continuing a planned expansion of Strawbridge's, along with heavy marketing to attract new tenants and one or two fashion-oriented department stores.

"They're doing the smart thing, looking for acquisitions that make sense for their portfolio, that are undergoing or can undergo renovations," said Cathy Creswell, a principal with BT Alex Brown Inc. "Obviously, it's well below Rouse's average occupancy, but I don't believe they would take it on without believing they could substantially increase the occupancy over the next year or two."

Pub Date: 12/04/97

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