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Starwood Capital to Buy 7 Taubman Malls for $1.4 Billion

Starwood Capital CEO Barry Sternlicht
Starwood Capital Group LLC Chief Executive Officer Barry Sternlicht said the deal with Bloomfield Hills, Michigan-based Taubman Centers Inc. will expand the business to 28 properties in 15 states. Photographer: Patrick Fallon/Bloomberg

Starwood Capital Group, the investment firm run by Barry Sternlicht, agreed to buy seven U.S. malls from Taubman Centers Inc. for about $1.4 billion to expand its retail holdings.

Starwood will pay $785 million in cash and assume $620 million in debt, according to a statement today from the companies. The properties include MacArthur Center in Norfolk, Virginia; the Shops at Willow Bend in Plano, Texas; and Fairlane Town Center in Dearborn, Michigan.

Starwood, based in Greenwich, Connecticut, has been building a retail real estate company through acquisitions as the U.S. economy improves. In November, it purchased a majority stake in seven malls from Westfield Group, following a similar transaction with the Sydney-based company in 2012. The deal with Bloomfield Hills, Michigan-based Taubman will expand the business to 28 properties in 15 states, Sternlicht said today.

“The Taubman portfolio broadens our relationships with higher-end department stores and in-line tenants and gives us an excellent opportunity to continue to produce attractive returns for investors,” he said in the statement.

Shares of Taubman rose 2.5 percent to $75.51 today. They’ve gained 18 percent this year.

Taubman is building new malls in the U.S., including projects in Sarasota, Florida, and San Juan, Puerto Rico. The company also has three malls under development in China and South Korea and is spending $265 million on redevelopment projects at properties in California, Colorado, Florida and Tennessee, according to the statement.

‘Transformative’ Deal

Taubman said it’s taking advantage of high investor demand for malls.

“We believe this opportunity is transformative for the company,” Chief Executive Officer Robert Taubman said on a conference call today. “Selling these centers is particularly bittersweet as we developed each and every one.”

The company estimates that the sale will increase net operating income growth as it keeps its strongest properties, Taubman said on the call. The transaction also will boost the company’s per-square-foot tenant sales, which totaled $721 last year, by more than $100, he said in the statement.

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