The owner of several Bay Area malls, including the Gilroy
Premium Outlets and Stanford Shopping Center, has bid to buy a
bankrupt rival in a $10 billion deal.
By George Avalos
The owner of several Bay Area malls, including the Gilroy Premium Outlets and Stanford Shopping Center, has bid to buy a bankrupt rival in a $10 billion deal.
Simon Property Group wants to purchase General Growth Properties, which in the Bay Area owns Eastridge Mall in San Jose Newpark Mall in Newark, Southland Mall in Hayward, West Valley Mall in Tracy and Stonestown Shopping Center in San Francisco.
“This can only be good for General Growth’s malls,” said Sandy Berry, vice president with Cornish & Carey Commercial, a realty brokerage. “Simon offers a good vehicle for changes at those malls.”
In particular, the two malls in the East Bay, Newpark and Southland, could benefit from new ownership.
“Some of General Growth’s centers have not been renovated and they haven’t brought in all the retailers they could,” said Sandra Weck, a senior vice president with commercial real estate firm Colliers International. “A Simon deal could be very positive.”
Brokers said that the East Bay malls could benefit from an owner that would take a fresh look at the properties.
“Both Newpark and Southland need a major turnaround,” Berry said. “They need an extensive renovation.”
The other Bay Area malls that General Growth owns, Stonestown, West Valley Mall and Eastridge, underwent relatively recent renovations and don’t need any significant upgrades, several brokers said.
“Simon’s offer provides the best possible outcome for all General Growth stakeholders,” CEO David Simon said in a prepared release.
Operators of local malls owned by General Growth, including Newpark and Eastridge, referred comments about the Simon bid to company headquarters in Chicago. General Growth executives had no immediate comment.
“This deal would greatly expand Simon’s mall holdings in the Bay Area,” said Patrick McGaughey, a vice president with Terranomics, a brokerage that specializes in retail properties. “It would be a huge increase in what Simon owns.”
In addition to Stanford Shopping Center in Palo Alto, Stoneridge in Pleasanton and Hilltop in Richmond, Simon owns Great Mall in Milpitas and Santa Rosa Plaza. Simon also owns outlet centers in Gilroy, Petaluma and Napa, according to the mall owner’s Web site.
Nationwide, a Simon-General Growth merger would own about 29 percent of the square regional mall in the country. At present, Simon owns about 15 percent and General Growth about 14 percent.
General Growth toppled into the nation’s largest real estate bankruptcy due mortgage debts it amassed at the height of the real estate bubble.
“If this deal goes through, you would have Simon, Westfield and Macerich as the major owners of malls in the Bay Area, along with a few malls owned by independent companies,” McGaughey said. “This would reduce the number of competitors in the Bay Area.”
Yet Simon could have the flexibility, with new holdings, to position malls that would cater to different kinds of customers.
“They could change the direction of one mall to have discount retailers, and have higher-end retailers in another, if there is overlap,” Weck said.
Even a physical face-lift of the exterior of a mall could fuel more shopping.
“Shoppers like to feel that there is something new going on at a mall, even if it’s only a renovation,” Weck said
