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Published: Monday, 9/16/2013 - Updated: 10 months ago

Franklin Park sold in $1.64B package deal

Starwood buys Toledo mall, 6 other Westfield properties

BY JON CHAVEZ
BLADE BUSINESS WRITER
Westfield acquired the Franklin Park Mall in 2002 from Rouse Co. of Baltimore, its owner/developer. Westfield acquired the Franklin Park Mall in 2002 from Rouse Co. of Baltimore, its owner/developer.
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The Franklin Park Mall opened in 1971 and bested three other area malls: Southwyck Shopping Center, North Towne Square Mall, and Woodville Mall. The Franklin Park Mall opened in 1971 and bested three other area malls: Southwyck Shopping Center, North Towne Square Mall, and Woodville Mall.
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Toledo’s Westfield Franklin Park mall has been sold to private equity firm Starwood Capital Group as part of a $1.64 billion, seven-mall package.

The sale was announced on Monday by officials of Australia’s Westfield Group, which has owned the mall for 11 years.

Also included in the deal are Westfield’s other two Ohio properties, Belden Village Mall in Canton and Great Northern Mall in suburban Cleveland. Also sold were Westfield malls in Indiana and Washington and two in California.

Westfield said it expects the deal to close sometime in the fourth quarter. Starwood will be the majority owner and manage the malls, but Westfield will retain a 10 percent common equity interest in the properties.

Starwood Capital, which is based Greenwich, Conn., had no comment regarding the transaction, spokesman Tom Johnson said. The private equity firm is not ready to disclose its plans for the acquisitions, he said.

Franklin Park, which has 1.2 million square feet, opened in 1971.

This is not Starwood Capital’s first deal with Westfield. In 2012, the private equity firm bought a 90 percent stake in seven Westfield malls in Illinois, Nebraska, Florida, and California.

In announcing the sale on Monday, Peter Lowry, Westfield Group co-chief executive officer, said Franklin Park and the six other malls in the package were no longer considered to be part of Westfield’s core assets, and therefore the mall operator was selling them to fund improvements in its remaining properties.

“Today’s announcement continues the implementation of our strategic plan, which positions [Westfield] to generate greater shareholder value,” Mr. Lowry said in a statement.

“We are focused on redeploying our capital into superior retail destinations in major cities through divesting noncore assets and introducing joint venture partners into our high quality portfolio of assets,” he said.

Retail experts said that for more than a year Westfield has become focused on divesting itself of its properties that aren’t on the East and West Coasts.

“It’s all about the upside,” said Stan Eichelbaum, a shopping-mall consultant and head of Marketing Developments Inc. of Fort Lauderdale, Fla.

“When you look at [Westfield’s] entire portfolio that they sold, they are all steady performers that didn’t have high growth potential,” Mr. Eichelbaum said.

“It’s all about potential. They are using this [sale] capital for properties like Century City in [Los Angeles]. That’s a jewel of a property.

Westfield said that although the transaction is valued at $1.64 billion, that is $120 million less than the total book value of the seven properties as of Dec. 31, 2012.

Called crown jewel

Mr. Eichelbaum said Franklin Park likely was the crown jewel of the deal.

“You have to consider that in today’s world that Franklin Park is a premier property, even though you would call Toledo a ‘B’ market,” he said. “It is a very dominant, very desirable property.”

Mr. Eichelbaum said the mall’s strength is evident in that it bested three rivals — Southwyck Shopping Center, North Towne Square Mall, and Woodville Mall — that no longer exist.

“Franklin Park was the winner. The others are gone,” he said.

Because of its dominance, “I don’t see any concerns that [Starwood] will operate it at a lesser level of operations or have a lesser allocation of revenues to support it,” Mr. Eichelbaum said.

Name to change

“They will likely just operate it as it is, except for the name of the mall will change,” he added.

Westfield acquired then-Franklin Park Mall in January, 2002, from the original owner/​developer, the Rouse Co. of Baltimore, in a $5.3 billion deal that involved 35 malls changing hands.

Mike Podracky, who managed Franklin Park for Rouse, and who later was a vice president with General Growth Properties of Chicago before retiring last year, said industry executives have known for a while that Franklin Park was about to be sold again.

“Starwood, they’ve been on a buying spree, so I was not surprised they bought it,” Mr. Podracky said. “Westfield has wanted to concentrate on both coasts, the East and West coasts. [Franklin Park] is a great asset. … But with what they’re doing, it doesn’t fit,” he said.

Mr. Podracky, who lives in Toledo, said that although Westfield spent significant money — $113 million in 2005 — to redevelop the property, the mall might have been better off if Rouse had kept it.

“Rouse had a much better, stronger sense of ownership and didn’t view it as an investment property,” he said.

Steve Serchuk, a retail expert with the Toledo office of Signature Associates Inc., agreed.

“I don’t think Westfield was the best hands for the mall to be in. I thought when it was owned by Rouse it was more a dominant player, and Westfield allowed a carnival there and other uses around the mall that were not conducive to being a top-shelf retail property,” he said.

New tenant mix?

Mr. Serchuk said Toledoans will have to “wait and see” what tenants Starwood wants and doesn’t want for the mall. “This is a major property but not a major market,” he said.

It remains unclear how Starwood will run its malls because the private equity firm only got into the mall business in 2012.

Starwood Capital, which has $23 billion in assets overall, created Starwood Retail Partners in 2012, a platform it is using to make retail property investments and manage its mall properties. With Monday’s deal, it now owns 17 mall properties and nearly 18 million square feet of retail space.

Some Wall Street analysts have suggested that Starwood could form a real estate investment trust and turn the mall property portfolio into a publicly traded stock. Others see the move as another step to diversify its private equity portfoilo.

Mr. Podracky said he doesn’t see Franklin Park suffering under Starwood, rather, just the opposite.

“Franklin Park is in a very enviable position as an ‘A’ list shopping center. It is strong. It can become even stronger,” he said. “It can attract another higher tier of tenants like a [high-end fashion retailer] Michael Kors. I could see a retailer like that being attracted to Franklin Park.”

The mall now is anchored by Dillards, J.C. Penney, Macy’s, and Dick’s Sporting Goods. A 16-screen theater complex is managed by Cinemark Holdings Inc.

Among the mall’s competitors are two outdoor shopping complexes, Levis Commons in Perrysburg and the Shops at Fallen Timbers in Maumee.

Mr. Podracky said the lure of Franklin Park is that it appeals to the entire cross-segment of consumers in the Toledo area, from low end to high end and everyone in-between.

“It doesn’t need it, but it could benefit from a little tweaking of the merchandise mix,” he said.

Longtime Franklin Park tenant Phil Kajca, owner of J. Foster Jewelers and Pandora stores, said he welcomes the prospect of a new owner. Mr. Kajca said tenants have been hearing for several months that the deal with Starwood was all but finalized.

“Westfield did a nice job with the mall. They did that whole expansion wing,” he said. “But I think having new owners might reinvigorate the property,” Mr. Kajca said.

“I think there’s going to be some sense of urgency to do some even more exciting things now with the mall, maybe draw some new tenants who are not already in the area,” he said.

Mr. Kajca said there’s been talk that some retailers in the Toledo area plan to move into the mall because of the new owner, but there’s really only one announcement that he is waiting for.

“Hopefully they’ll just call the mall ‘Franklin Park Mall’ again,” Mr. Kajca said. “That’s what Toledoans like to call it and that’s what I like to call it.”

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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