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Starwood markets $1.2bn US mall portfolio

The private equity real estate firm is looking to sell seven retail properties that it acquired in 2012.

Starwood Capital Group is reportedly marketing its majority interest in a $1.2 billion mall portfolio that it purchased in 2012.

The Greenwich, Connecticut-based private equity real estate firm bought a 90 percent stake in seven malls from Sydney-based real estate investment trust The Westfield Group in June 2012 for $1.1 billion, according to real estate data provider Real Capital Analytics (RCA). Westfield retained the remaining 10 percent interest in the portfolio, according to a statement from 2012.

The malls, located in California, Illinois, Ohio, Nebraska and Florida, seeded Starwood’s retail platform, Starwood Retail Partners, which now owns 30 malls in 15 states, according to its website. The properties were built from 1960 to 1996 and total about 6.6 million square feet of retail space, according to RCA. A spokesman for Starwood declined to comment on the sale. According to a Bloomberg report, the seven malls are now valued at about $1.2 billion. It is unclear what price Starwood is seeking for the portfolio.

Chris Angelone, a managing director with real estate advisory firm JLL, told PERE that investors are more carefully scrutinizing each mall’s fundamentals in a market that has stabilized since the 2010 to 2012 era, when private equity firms looking for opportunistic buys picked up portfolios across the country.

“There aren’t new entrants in the mall space for larger deals,” Angelone said. “For strong-performing assets, you are seeing traditional capital sources, both institutional capital and foreign capital, and the public real estate investment trusts looking to strategically acquire these assets.”

Anchor tenants for the malls in the portfolio Starwood is reportedly marketing include department stores such as Sears, JC Penney and Macy’s, businesses that now face challenging environments as customers embrace online shopping. Real estate research firm Green Street Advisors wrote in an analyst note earlier this month that a “difficult retail environment” is causing older malls to struggle and some to reassess their tenant mix. Malls that have traditionally relied on department stores and other struggling tenants are changing their anchor base to grocery stores, entertainment venues and restaurants.

“For everything but the very best malls, the mall format needs to continue to reinvent itself,” Angelone said. “The new anchors of retail really are food and entertainment. In order to create vibrancy and to be competitive in the market today, you need to have sticky tenants that drive visits.”