NEW YORK CITY—Nostalgia was in the air—or at least the webcast airwaves—when leaders of two major mall REITs spoke at the National Association of Real Estate Investment Trusts REITWeek 2014. Celebrating 20th anniversaries will do that, particularly when you're done with divesting some of the assets that got you there in the first place. And the future remains somewhat unpredictable.
“Going back to 1994 [the year of its IPO] brought interesting memories,” said Macerich President Edward C. Coppola. “When we went public the total combined market cap was something less than $40 billion. Today, it's approaching over $1 trillion. When you add into that the assets these REITs control, you're at $2.5 trillion to $3 trillion.”
With $1 billion in projects sold in the last 15 months and 95 percent of its NOI now coming from its core portfolio, Macerich is done with selling centers, Coppola said. Even its $550 million renovation and expansion of Tysons Corner Center was financed by refinancing the project's existing loan.
Meanwhile, Simon Property Group, which has been public for 21 years (“We're legal,” joked Chairman David Simon), essentially has seen a complete transformation of its portfolio. Simon noted that its recent spinoff of its smaller malls and open-air centers, Washington Prime, bears a much stronger resemblance to the portfolio that went public in 1993.
“The reason we didn't sell them is because we actually believe in that business. Otherwise we otherwise would just have sold it,” Simon said. “It's a solid stable business with a good return on investment. It's a Simon 20 years ago.”
Given the growth and shift, it probably wasn't fair to ask either Coppola or Simon to predict how their companies would look in the future—but of course the moderators did.
“We are not going to be the biggest outlet owner in the United States. We do have leasing and marketing capability in the outlet world today,” Coppola said. “We see a limited number of outlets on the horizon – five, six or seven to eight. But they need to have the characteristics of a Niagara or [Fashion Outlets at] Chicago.”
China is not in Simon's sights again after the company exited its investment in 2009. Instead, growth will come as opportunities arise and through a focus on its core business.
“The original will continue to be a retail real estate company, very focused on making sure the portfolio is meeting the needs in a particular marketplace for consumers and our retailers,” Simon said. “And, hopefully, continuing to focus on improving that real estate any way we can.”
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