Partridge Creek in Clinton Township is being purchased by Starwood Capital Group, a global private investment firm (Charles V. Tines / The Detroit News)
Taubman Centers, owner and operator of malls and shopping centers across the nation, announced Wednesday it would sell seven of its 24 shopping center properties, including Fairlane Town Center in Dearborn and the Mall at Partridge Creek in Clinton Township.
The Bloomfield Hills-based Taubman Centers will keep Great Lakes Crossing Outlets in Auburn Hills and Twelve Oaks Mall in Novi among its 17 remaining shopping centers — two fewer malls than when the company went public in 1992.
The properties are being purchased by Starwood Capital Group, a global private investment firm. Starwood will pay $785 million in cash and assume $620 million in debt, according to a statement Wednesday from the companies. The malls themselves will be managed by a subsidiary of Starwood Capital Group called Starwood Retail Partners.
The agreements were signed Wednesday between Taubman and Starwood although the closing of the deal won’t take place until the fourth quarter of the year, said spokesman Christoper Tennyson in a phone interview with The Detroit News.
“Taubman will be managing the properties up to the closing and the day after the closing, Starwood will be operating them,” he said. “Shoppers should see no change.”
Tom Johnson, spokesman for Starwood, said the company declines to discuss strategy or plans for the acquired properties until the deal is closed.
Ed Nakfoor, an independent retail analyst from Birmingham, said the deal has less to do with the “productivity of the assets than to do with a way to enhance the value of the company overall.”
“It’s the big picture,” Nakfoor said. “Taubman has always put a lot of care into design and merchandising of their properties and Starwood is savvy enough to realize it.”
In a company press release, Taubman said the sale is part of the company’s “ongoing strategy to recycle capital, maximize its NOI growth and create net asset value for investors over time.” The company is currently building six more malls.
Basically, the company is hoping to raise money from the sale of the seven properties to be able to invest in other properties elsewhere, said Ken Dalto, a Bingham Farms-based retail analyst.
“It’s a strategic move to get debt down and have cash for new expansions,” said Dalto, who noted Taubman Centers is looking to expand into China and other Asian markets, which is an expensive endeavor.
“As for Starwood, they are building an empire and want to do it quickly, so they want to buy good malls.”
Aside from the Fairlane and Partridge Creek properties, other malls that will be sold include the MacArthur Center in Norfolk, Va., Stony Point Fashion Park in Richmond, Va., Northlake Mall in Charlotte, N.C., The Mall at Wellington Green in Wellington, Fla., and the Shops at Willow Bend in Plano, Texas.
Starwood, based in Greenwich, Conn., has been building a retail real estate company through acquisitions as the U.S. economy improves. In November, it purchased a majority stake in seven malls from Westfield Group, following a similar transaction with the Sydney-based company in 2012. The deal with Taubman will expand the business to 28 properties in 15 states, said Barry Sternlicht, who runs the investment firm.
“The Taubman portfolio broadens our relationships with higher-end department stores and in-line tenants and gives us an excellent opportunity to continue to produce attractive returns for investors,” Sternlicht said in the statement.
The Taubman company reported mall tenant sales per square foot of $721 in 2013 and upon completion of these transactions, expects its mall tenant sales to increase by more than $100 per square foot, Taubman said in a statement.
"The seven centers we are selling are strong properties that fit well within the Starwood portfolio and will continue to thrive under their management," Taubman said.
Even as the company divests itself of the seven properties, Taubman is building new malls, including projects in Sarasota, Fla., and San Juan, Puerto Rico. The company also has three malls under development in China and South Korea and is spending $265 million on redevelopment projects at properties in California, Colorado, Florida and Tennessee, according to the statement.
“We believe this opportunity is transformative for the company,” Taubman said on a conference call Wednesday. “Selling these centers is particularly bittersweet as we developed each and every one.”