Starwood buys seven US shopping centres for $1bn

The Greenwich, Connecticut-based private equity real estate firm bought the properties from The Westfield Group, which is selling eight of its non-core US centres for $1.15 billion.

Starwood Capital Group has agreed to buy seven US shopping centres from The Westfield Group for $1 billion. According to a statement from Westfield, the sale is part of the Sydney-based mall developer’s plan to divest eight of its non-core shopping centres in the US for $1.15 billion. Starwood will obtain a majority interest in seven of the centres while the eighth centre, Eastland, is being sold via a separate transaction.

“We have previously flagged the potential divestment of non-core assets in the US, and this transaction is an important step in the repositioning of our portfolio to major retail assets with strong franchise characteristics,” said Peter Lowy, co-chief executive officer of Westfield, in a statement. “Proceeds from the transactions initially will pay down corporate debt and then be redeployed in higher return redevelopment opportunities in the US, including the World Trade Center.”

Starwood has formed a new retail platform to acquire the majority interests in the seven shopping centres from Westfield. The Greenwich, Connecticut-based private equity real estate firm will manage and control the platform, while Westfield will continue to retain a 10 percent interest.

The assets that Starwood gained control of are: Chicago Ridge and Louis Joliet in Chicago; Gateway in Lincoln, Nebraska; Metreon in San Francisco; Solano in Fairfield, California; SouthPark in Cleveland; and Westland in Miami. The centres have aggregate sales per square foot of $373 and were 93.8 percent leased as of 31 December, excluding Metreon, which currently is under redevelopment and scheduled to open this fall. The Starwood transaction is expected to close sometime this quarter.

Meanwhile, Westfield has agreed to sell Eastland, a power centre in West Covina, California, to an undisclosed buyer for $147 million. The Eastland transaction is expected to close within 45 days.

Starwood has been on a buying spree in 2012, having kicked off the year closing on the acquisition of a commercial loan portfolio with a total face value of $312 million from a southwestern US regional bank. In February, it was announced that the firm purchased a mixed-used property in Miami Beach through a consortium for nearly $324 million.

Separately, Starwood currently is the midst of raising between $2 billion and $3 billion in equity for its ninth global real estate fund, according to people familiar with the matter. PERE learned that Starwood Distressed Opportunity Fund IX, which is focusing predominantly on distressed opportunities in the US, closed on $1.2 billion of equity in December 2011, just four months after it was launched. 

Although it is unclear whether or not Starwood bought these properties on behalf of Fund IX, it is unlikely, as they are not distressed assets. At press time, representatives from Starwood could not be reached for comment.