DES MOINES, Iowa -- Three investor groups announced Wednesday they have agreed to buy interests in 19 shopping centers for $1 billion from Prudential Insurance Co. of America.
The buyers, who include General Growth Properties, Westfield Holdings Ltd. and Whitehall Street Real Estate Limited Partnership III, said they believe the deal represents the largest acquisition of regional mall shopping centers in the United States.
The deal, expected to close at the end of the year, will transfer all of the stock of Prudential's shopping-center holding company, CenterMark Properties Inc., to the investors. Prudential filed last month to spin off CenterMark in an initial public offering that would have raised more than $500 million.
The buyers said the purchase price includes assumption of current mortgages as well as additional mortgages to be provided by Prudential when the deal closes.
Martin Bucksbaum, chairman and chief executive officer of General Growth Properties, said negotiations over the CenterMark properties began in early summer.
The executive explained that Prudential was willing to sell the assets because of new standards for insurance companies going into effect next year. Those new rules will require insurers to significantly increase their reserves for real estate holdings.
'The shopping centers no longer fit with Prudential's strategy,' Bucksbaum said.
Other insurers also have been selling off real estate assets recently in anticipation of the new rules, but most of those deals have involved distressed property.
The buyers said that St. Louis-based CenterMark will continue to operate as a separate entity. 'We are not planning any major operating changes,' Bucksbaum said.
Nine of the 19 CenterMark properties are in California: Eagle Rock Plaza, Los Angeles; North Coast Fair, Escondido; Plaza Bonita, National City; Plaza Camino Real, Carlsbad; Topanga Plaza, Los Angeles; Mission Valley Center-East and Mission Valley Center-West, San Diego; The Plaza, West Covina; and Eastland Shopping Center, West Covina.
There are also four properties in Missouri: South County Center, Mid River Center and West County Center, all of St. Louis; and West Park Mall, Cape Giradeau.
CenterMark also holds interests in two malls in Hartford, Conn. -- Enfield Square and Meridien Square.
The other properties were Westland Center, Denver; Vancouver Mall, Portland, Ore.; Montgomery Mall, Bethesda, Md.; and Annapolis Mall, Annapolis, Md.
General Growth Properties, of Des Moines, Iowa, is a 35-year-old real estate investment trust that already owns 21 malls in 15 states and has annual revenues of abut $120 million. It went public in April with a $430 million offering at $22 a share.
'This is certainly the biggest acquisition we have ever made,' Bucksbaum said. He estimated that the cash portion of General Growth's investment in the CenterMark deal will be $200 million.
Wall Street appeared pleased with the deal as General Growth's stock was up $1.625 to $22.75 a share.
Australia-based Westfield Holdings, manager of that nation's largest property trust, operates 24 malls in Australia and seven in the United States.
Whitehall Real Estate is an investment partnership formed by Goldman Sachs & Co., which was the adviser to the buyers. Morgan Stanley Realty was the adviser to Prudential.