Macerich to Pay $662 Million for Phoenix Mall Operator

Shopping mall owner Macerich Co. said Friday that it had agreed to acquire the largest mall operator in the fast-growing Phoenix area for $662 million and the assumption of debt in a deal that would transform the Santa Monica-based company into one of the nation’s largest owners of retail real estate.

The acquisition of Phoenix-based Westcor Realty, which owns all or part of nine regional malls, would significantly boost the size of Macerich’s portfolio and help the publicly owned real estate investment trust remain independent as the mall industry consolidates, real estate analysts said.

After the deal is completed, Macerich would own all or part of 55 regional malls and 21 community centers with 57 million square feet of space across the nation.

In Southern California, Macerich’s properties include Santa Monica Place, Los Cerritos Shopping Center and Northridge Mall.

“It is obviously a company-transforming transaction,” said real estate securities analyst David Shuman at Lehman Bros. “This puts them in the big leagues.”

Macerich would pay $662million in cash, assume $733 million in existing debt and issue about $80million worth of securities convertible into preferred shares. Westcor is a privately held company owned primarily by Boston-based investment advisor AEW Capital Management on behalf of its institutional clients.

Determined to expand, Macerich topped offers by much larger rivals, including the nation’s second-largest mall owner, General Growth Properties Inc., according to Bloomberg News.

Some Wall Street investors, however, were apparently concerned that Macerich’s winning bid was too aggressive and that it would take on a daunting amount of debt, industry analysts said.

On the New York Stock Exchange, Macerich shares fell 17 cents to $28.55.

Macerich President and Chief Executive Arthur Coppola dismissed talk that the firm might have overpaid, saying all the bids were close. He said Macerich already has received unsolicited bids for individual Westcor properties that exceeded earlier estimates.

Macerich said the deal would give it not only a highly productive portfolio of malls but also the capability to expand in the lucrative Phoenix area.

Sales at Westcor’s malls average about $407 a square foot, 15% higher than Macerich’s portfolio, and the company has the option rights to develop an estimated 1,000 acres of retail properties.

“There is a great deal of growth that we can realize from Westcor’s development pipeline and undeveloped land portfolio,” Coppola said. “We view this transaction as a great opportunity to expand our platform.”

He said Macerich plans to continue to expand through acquisitions and redevelopment of mall properties.