Potential merger may signal the future of shopping malls

6/18/2016 | Real Estate Blog

Last summer was a banner year for corporate mergers and acquisitions. While many multi-billion dollar deals involved pharmaceutical companies looking to lower their federal corporate tax burdens, it appears that this summer will focus on mergers between real estate investment firms.

One such deal involves the potential merger of Pennsylvania Real Estate Investment Trust (PREIT). The owner and operator of Cherry Hill Mall and a major partner in the redevelopment of Center City’s Gallery at Market East could merge with another company if it would positively affect shareholders. 

PREIT’s CEO noted this possibility at a real estate investment conference in New York, and with his comments coming on the heels of $2.8 billion takeover of Rouse Properties by Brookfield Asset Management. Similarly, Kite Realty Group Trust of Indianapolis is negotiating a merger with WP Glimcher, Inc., an Ohio based property management company.

The mergers are said to be a direct action to what is happening in the retail market; specifically the increasing popularity of online retail. Because of this mall operators have increased their focus on promoting experiences that cannot be replicated online. So through these mergers, mall operators and property owners may be more comfortable with family experience venues such as bowling alleys, restaurants and amusement venues such as “The Crayola Experience” and “LegoLand.”

The future of these mergers are prime examples of the need for experienced real estate counsel when it comes to negotiating the terms of a real estate acquisition. In the meantime, PREIT’s average sales per square foot may still make it an attractive target for potential suitors.