Santa Monica, Calif.-based Macerich Co.’s 13-year reign as Arizona’s largest shopping mall owner might be coming to an end.
Macerich, a publicly traded real estate investment trust, or REIT, could be facing a takeover attempt by one of its biggest rivals, and some experts say it be bad news for retailers.
The California REIT’s portfolio of 59 shopping malls is mostly concentrated on the West Coast. In Arizona, it owns 15 malls including high-end assets such as Scottsdale Fashion Square, Kierland Commons and Biltmore Fashion Park.
Over the past several months, Macerich’s rival, Indianapolis-based Simon Property Group Inc., also a publicly-traded REIT, has decided it might want in on the action.
Simon approached Macerich with the idea of a buyout for the second time in several months, although no official offer was made, according to the Wall Street Journal and industry insiders.
Buyout rumors began around November after Simon disclosed it had scooped up a 3.6 percent stake in Macerich, which often signals that a takeover attempt is coming.
“I find it kind of scary,” said local retail analyst Jeff Green, who is president and CEO of Phoenix-based Jeff Green Partners. “It really means the retailer will have less clout.”
Representatives at Simon and Macerich did not respond to requests for comment.
Although Simon owns only one mall in Arizona — Tempe’s Arizona Mills — it is the largest retail REIT in the nation. Macerich is ranked third-largest. It has maintained the largest shopping mall footprint in Arizona since acquiring Phoenix-based mall developer Westcor Realty L.P. in 2002.
Thus, the two REITs combined would create the largest shopping mall owner in the country by far. For Simon, it would boost its West Coast-presence and offer growth opportunities at a time when new mall development has stalled nationwide.
Green said retailers, especially smaller ones, would be the biggest losers as a result.
“The ability to control so many malls lets them, one, increase the price they’ve charged for that space and, two, allows them to package deals whereby retailers have to go into the less optimal malls,” Green said.
Green said Simon has a reputation for requiring tenants to open stores in mid- or low-performing malls if they want to be located within the best, upscale malls. He said that practice would likely continue post-takeover, but obviously on a larger scale.
“Some retailers would then open in locations that weren’t optimal for them and would then have to close,” Green said.
While consumers probably wouldn’t be affected by a buyout, he said employees at Macerich’s corporate office in Phoenix could be relocated or laid off.
It’s unclear whether Macerich is even open to a buyout, or how it will respond should Simon make a formal offer.
But given how much malls have struggled in the age of online shopping, experts such as Green say a takeover might be inevitable.
“It’s a difficult time in the retail industry,” he said. “Macerich has had a long run. It may just be the right time.”
