properties. Now it appears that the line is blurring. Investing in
retail, in short, is not without its complications.
Another more recent mega-deal deal, albeit one driven by a
desire to stand firm against the growing e-commerce threat, was
Unibail-Rodamco’s proposed $15.7-billion takeover of Westfield
Corp. In May it received a nod of approval from Westfield’s shareholders, effectively paving the way for the international transaction to close. There had been concerns that the deal might fall
apart; its value had eroded by more than $1 billion since its
December 2017 announcement by a drop in
Unibail-Rodamco shares and changes in for-eign-exchange rates. Still, shareholders
approved it and amidst the hubbub after the
vote, Steven Lowy, the retired co-CEO of
Westfield, declared to television news reporters that the deal could lead to more merger
and acquisition activity in the industry.
One interesting component of the transaction is OneMarket, Westfield’s San Francisco-based retail tech lab that will spin off as a
separate entity to be listed on the Australian
Stock Exchange that will be headed by Lowry.
Plans for the company include the development of a new retail messenger system called
Hadley that will connect shoppers to retailers
to give retailers better insight into shoppers’
browsing history and purchases, according to
a recent investor presentation. Nordstrom will
be using the system, according to the presentation. Capital, in other words, is not just flowing
into the retail sector, but also into technology
that will help it stay competitive.
THE MIXED-USE STORY
Besides its embrace of e-commerce, or rather its embrace of technology to help it better compete with e-commerce, retailers are
also bullish on the mixed-use model. Usually this has meant some
combination of apartments, but increasingly hotels are being
added to the mix. As one example, recently Marriott International
announced it planned to open five new hotels, specifically its select-service brands AC by Marriott and Residence Inn, at retail centers
owned by Simon Property Group, over the next several years.
This is not a new strategy for either company; Simon began adding hotels to its retail properties—some of which were Marriott
flags—about 15 years ago and now it’s stepping up this strategy.
Already, there are more than 15 Marriott-branded hotels located at
Simon Properties and the REIT plans to add 10 hotels to its properties through 2019, up from a total of four in 2016 and 2017.
The approach makes sense: retail centers like the traffic that
hotels deliver and hotel guests like to be located within walking
distance of the dining and entertainment amenities that retail
centers are increasingly adding to their tenant mix. Or here’s
another use case: Such hotels also appeal to locals, who may book
a hotel for a special shopping trip such as a wedding gown hunt,
according to Jamie Krueger, director of sales and marketing at
the AC Hotel Atlanta Buckhead at Phipps Plaza.
Not that the hotel sector’s economic story is uniformly bright.
When Pebblebrook was making its play for LaSalle, for example,
one of the reasons the latter spurned the offer was due to
Pebblebrook’s history of missing RevPAR guidance.
LaSalle released a statement noting that its “Board has signifi-
cant concerns that Pebblebrook’s share price reflects its overly-
optimistic growth targets. Given Pebblebrook’s history of consis-
tently missing its RevPAR outlook over the past three years, and
based on current market conditions, LaSalle is not confident
Pebblebrook will meet its guidance.”
One takeaway from LaSalle’s decision to reject Pebblebrook?
In this season of the deal, if you don’t like an offer there is no
need to fret. Another suitor will be along shortly. ◆
Simon Property Group is stepping up its
strategy of adding hotels to retail properties,
as it did with the 166-room AC Hotel Atlanta
Buckhead at Phipps Plaza.
ForumPLUS: Season of the Deal
continued from page 60
1 Rockefeller Group
3 CIBC World Markets
5 Marcus & Millichap
7 Yardi Systems Inc.
9 Regus Global
11 Watson Land Co.
31 NAI Global
33 Village Green Holding
35 Granite Property
45 Hunt Mortgage Group
59 Marcus Millichap IPA
61 AG Net Lease Acquisition Corp
C2 Avison Young
C3 Northmarq Capital
C4 Capital One
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