Rouse is out shopping for more malls It is likely to bid for owner of stake in Towson Town Center

25 TrizecHahn properties

General Growth, Taubman among possible rival suitors

Commercial real estate

March 10, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Rouse Co. is likely to make a bid for the shopping mall portfolio of a Toronto-based company that includes the Towson Town Center.

The Columbia-based developer's plan to bid on the TrizecHahn Corp.'s portfolio of 25 malls comes less than a month after it was thwarted in an effort to buy a New York mall owner.

That acquisition would have doubled Rouse's size, making it one of the nation's top three retail property owners. Rouse lost the contest to acquire Corporate Property Investors Inc. when Simon DeBartolo Group Inc., of Indianapolis, bid $5.78 billion for CPI's 28 retail and office projects.

TrizecHahn's portfolio is expected to sell for more than $1.5 billion. "It's the type of portfolio that clearly fits the parameters that we have indicated we're interested in," said a Rouse source who asked not to be identified.

"I believe we'll take a serious, hard look at Trizec-Hahn, because they're exactly the type of properties we'd like to own."

Rouse is again expected to face competition. Among the other prospective bidders for TrizecHahn are General Growth Properties, Taubman Co., Annapolis Mall owner Westfield America Inc. and perhaps Simon DeBartolo.

David L. Tripp, a Rouse vice president and its director of investor relations, declined to comment on any potential bid for Trizec-Hahn.

TrizecHahn, which said it has not yet made a final decision on whether it will sell its malls, began sending out investment packages to potential buyers -- including Rouse -- late last month in response to what it termed "unsolicited offers." The company has retained both Merrill Lynch & Co. and J. P. Morgan to evaluate the offers.

"We feel we have a very valuable franchise with our retail properties, and the CPI transaction confirmed to us that malls have a great deal of value right now," said Tabb Davis, a TrizecHahn spokeswoman.

"And, in a consolidating industry such as the mall industry, we believe we're more likely to be a seller rather than a buyer."

TrizecHahn's decision to consider the sale of the retail properties totaling 23 million square feet comes as it has been on an aggressive downtown office buying spree.

The spree included the purchase of the debt on a 25-story office tower at 250 W. Pratt St.

TrizecHahn hasn't limited its office work to acquisitions. Last week, the company announced plans to develop a 50-story skyscraper in downtown Toronto, the first new office construction there in a decade.

Analysts said that buying TrizecHahn's malls would make sense for Rouse, especially because two-thirds of the properties are in California. Last year, retail projects accounted for one-third of TrizecHahn's $143 million in net operating income. In all, Trizec-Hahn owns 98 projects totaling 66 million square feet.

"It would make a nice fit," said Robert A. Frank, director of research at Legg Mason Wood Walker Inc. "TrizecHahn's properties are mainly West Coast, while Rouse's portfolio is mainly East Coast, so, geographically, it would make for a nice merger. And Tri-zecHahn has good quality assets."

Locally, TrizecHahn owns a stake in Towson Town Center, which it expanded in the early 1990s with a $100 million investment. More than half of its malls are anchored by either Nordstrom or Macy's department stores, according to its investment package.

Rouse may have an edge in any bidding war because it is intimately familiar with the TrizecHahn properties.

Beginning in 1981, the former Trizec Corp. -- owned by Peter and Edgar Bronfman of Seagram Co. Ltd. and Olympia & York Developments Ltd. -- controlled a 22 percent stake in Rouse and was the company's largest shareholder.

Before Trizec ran into financial problems and was forced to shed most its shares in September 1992 for $114 million, the two companies even considered merging at least their retail operations.

Today, the two companies jointly own the Fashion Show Mall in Las Vegas, but almost by accident.

Rouse acquired a 75 percent share in the mall when it bought the Howard Hughes Corp. for $520 million two years ago.

Pub Date: 3/10/98

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