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PHOENIX-The Macerich Co., AEW Capital Management and Somera Capital Management LLC have teamed to buy Metrocenter from DVM Co., a joint venture of Indianapolis-based Simon Property Group and Rusty Lyon Jr. of Phoenix. The acquisition price was not disclosed, but industry experts speculate the 1.4-million-sf super regional center sold for as much as $150 million.
The partnership will embark on a redevelopment and repositioning of the regional mall, built in 1973. Somera's executive vice president Steve Plenge tells GlobeSt.com that the renovations will cost more than $20 million and will include exterior and interior work. The partnership has tapped Seattle-based Callison Architects to handle the design work. Construction will begin in the summer and finish in time for the 2006 holiday shopping season.
"We think this property has suffered by not being at the top of the previous owner's list," Plenge says. "There's been some neglect and we think we can capitalize on it."
Macerich Co.'s Westcor division will manage and lease the property. It will head up the redevelopment and repositioning of the regional mall, built by Lyon on a 107-acre site along Interstate 17 between Peoria and Dunlap avenues. More than 450,000 residents live within a five-mile radius of Metrocenter, making it one of the more densely populated areas in the city.
Metrocenter, which is 84% leased, boasts sales of $330 per sf. This year, 15% of the leases will roll, according to Plenge. The center has an average rental rate hovering $25 per sf.
The 184-tenant center is anchored by Dillard's, JCPenney, Macy's, Robinson-May and Sears. All of the anchors own their spaces, except for Macy's and it's owned by a private investment group from New York City.
Earlier this month, Macy's announced plans to close its store in the coming months. Plenge says the partnership acquired Macy's leasehold interest, which does not expire for 70 years, and will work to re-lease it although there are no commitments at this time. "We think we can create a lot of value for the partnership and do something good for the community," Plenge says.
With the acquisition, Macerich now controls 12 properties--including eight regional malls--in the Valley totaling nearly 11.6 million sf. Somera's acquisition was on behalf of Somera Realty Value Fund and AEW's on behalf of an institutional client.
Metrocenter is Somera's fifth mall acquisition since it moved into the retail arena in 2002. With a retail portfolio of more than 3.3 million sf, Somera also owns the recently renovated 1.1-million-sf West Oaks in Houston and the 570,000-sf Queen Ka'ahumanucenter in Maui.
Morgan Stanley Mortgage Capital in New York City provided acquisition and mezzanine financing. Chris Hoffmann of Eastdil Realty Inc., also based in New York City, was the listing broker.
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