Malls used to be an exceedingly profitable business decision for any kind of business, from real estate developers to run-of-the-mill holding companies. However, one giant of the industry could be starting a lengthy process of divesting its heavy stake in these commercial properties.
Westfield Corporation announced Monday (Dec. 21) that it had finalized the sale of five malls to a joint investor group that included Centennial Real Estate, Montgomery Street Partners and USAA Real Estate. Though Westfield will retain ownership of 34 other shopping centers spread across the U.S. and U.K., Peter Lowy, co-CEO at Westfield, explained that shaving five nonessential locations from its assets should help them compete better at the remaining ones.
“Our strategic focus is to create and operate flagship assets in leading markets and divest non-core assets. Today’s announcement marks a significant milestone in our divestment strategy,” Lowy said. “Proceeds from the transaction will initially reduce gearing and will be redeployed over time into our $11.4 billion development program. Our investment program is almost entirely weighted toward our flagship assets, with estimated development yields in the range of 7–8 percent, and is expected to create significant long-term value and earnings growth for securityholders.”
The malls that are part of the deal range in location from Connecticut to California, and while Westfield and Lowy might not care to turn what they call “non-core” properties into performing ones, Chain Store Age
explained that Centennial Real Estate has made something of a name for itself as a rejuvenator of failed or failing commercial properties
“A mall can’t just be about shopping anymore,” Centennial CEO Steven Levin said. “Understanding the needs of your market is the cornerstone of creating a one-of-a-kind experience that guests can’t get online or anywhere else.”
Regardless if Centennial is able to turn these malls around, Westfield isn’t likely to look back — not with the $1.1 billion netted from the deal.