Shopping Centers Today

AUG 2015

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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50 S C T / A u g u s t 2 0 1 5 or the corporate survivors of hardships like the recession of a few years back, recovery could mean not just improving operational performance, but perhaps having a time for corporate reflection as well — during which management can reassess the market and decide on a new way forward. and sometimes the best way forward might just be a merger with a stronger competitor. "after a downturn in the economy, companies and retailers right-size real estate portfolios," said Greg Maloney, president and ceo of Jll's americas retail group. "the ex- pense side gets squeezed down as low as possible, but then, when growth begins again, managers get back some of the margins, plus more than they had prior to the downturn. they also decide whether to grow organically or if there is a potential partner they could merge with or acquire that would be better suited for the company's future." in the shopping center world, this has meant a flurry of merger initiatives, some fulfilled, some aborted. the most notable instance of the latter may be simon's thwarted takeover bid for Macerich earlier this year. that particular hookup that never happened turned out to be a rarity, given that, globally, several smaller shopping center companies have struck deals to combine — some involving simon. last year the global markets saw the merger of Wash- ington prime Group, of Bethesda, Md., and columbus, ohio–based Glimcher realty trust. this year two european companies merged, as klépierre took over corio, while in canada calloway reit acquired smartcentres, and in australia federation centres and Novion property Group hooked up. sydney-based Novion was an externally managed portfolio until about 15 months ago; that was when the port- folio, managed by a division of the commonwealth Bank of australia, internalized its management and rebranded itself, while keeping the bank's old management team. "Novion became internally managed, but given [that] it was the same team running the business, investors were not expecting any significant cost reductions or change in strat- egy," said simon scott, managing director of australian equi- ties at Moelis & co. "it had a quality portfolio, and many peo- ple liked the assets but didn't see a lot of growth prospects." the transaction was almost a reverse takeover in that the smaller vehicle, Melbourne-based federation centres, "engineered the deal of putting the two groups together," according to scott, and federation chief steven sewell became ceo of the new company. one-third of the new company's assets had belonged to federation, and the rest came from Novion. this includes a 50 percent stake in Melbourne's chadstone shopping centre, the highest- producing shopping center in australia in terms of annual turnover, as well as stakes in other shopping centers. scott says he is not anticipat- ing too many mergers ahead in australia, because of an al- ready high con- centration of o w n e r s h i p i n t h e country's l a r g e r F tYiNG the kNot A suRgE IN MERgER ACtIVItY sIgNALs BEttER tIMEs, WItH soME sEEINg LANDLoRD tIE-uPs As tHE BEst WAY foRWARD IN AN EVER MoRE CoMPEtItIVE MARkEtPLACE By Steve Bergsman

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