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Which Regional Mall REITs Might Be the Next Takeover Targets?

In the wake of Simon Property Group Inc.’s pending $3.6 billion purchase of an 80 percent stake in Taubman Centers Inc.’s operating subsidiary, all eyes are on Macerich Co. as the next potential takeover target among retail REITs.

Santa Monica, Calif.-based Macerich is “next in line” to be acquired, says Alex Pettee, president and director of research and ETFs at Rowayton, Conn.-based investment adviser Hoya Capital Real Estate LLC, thanks to its high-quality portfolio of retail properties. The Macerich portfolio encompasses 51 million sq. ft., primarily made up of 47 regional malls along the West Coast, and in the New York City-Washington, D.C. corridor, Arizona market and Chicago market.

The tenants at Macerich malls generated annual sales of $801 per sq. ft. in 2019, up about 10 percent on a year-over-year basis, according to Callum Turcan, associate investment analyst at Woodstock, Ill.-based investment research firm Valuentum Securities Inc. By comparison, tenants at Simon’s malls and premium outlets reported annual sales of $693 per sq. ft., up about 5 percent year-over-year and tenants of Brookfield Property Partners LP’s core retail properties saw annual sales per sq. ft. grow by 5.9 percent year-over-year to $798.

Macerich’s geographical footprint, desirable properties and “meaningful” rent increases would make the REIT an attractive takeover target for Indianapolis-based Simon or Bermuda-based Brookfield, notes Turcan. Pettee expects Simon to hold off on further M&As—including a possible purchase of Macerich—until it has fully absorbed Taubman.

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