The Macerich CompanyMAC has struck a deal to sell part of its stakes in eight properties to Singapore's GIC and U.S.-based global real estate investment management firm - Heitman LLC. The move would allow the company to reap $2.3 billion in cash proceeds, which would then be used for share buybacks, special dividends and debt reduction.
Going into specifics, GIC will acquire 40% stake in five properties, while Heitman will buy a 49% interest in three properties. The transactions are slated to close in phases, starting Oct 2015 and will be completed by the first quarter of next year.
Importantly, after turning down Simon Property Group Inc.'s SPG takeover offer in the first half of this year, Macerich has been subject to demands for enhancing shareholder value. As such, concurrent with the stake sale news, the company announced a $1.2 billion share buyback program.
Macerich also plans to pay investors a special dividend of $3.50 to $4.50 per share. Cash proceeds from the transaction include Macerich's share of excess financing proceeds that is estimated to be $1.14 billion.
In fact, according to chairman and chief executive officer of Macerich, Arthur Coppola, "These transactions highlight the significant differential between the private and public markets valuation of [the company's] assets. Liquidity from these transactions will be used to bridge that gap."
The eight assets are valued at a total of $5.4 billion. Of these, GIC will acquire stake in Arrowhead Towne Center in Glendale, AZ; Lakewood Center in Lakewood, California; Los Cerritos Center in Cerritos, CA; Washington Square in Portland, OR; and South Plains Mall in Lubbock, TX.
On the other hand, Heitman will buy an interest in Deptford Mall in Deptford, NJ; FlatIron Crossing in Broomfield, CO; and Twenty Ninth Street in Boulder, Co.
Reflecting investor optimism on the news, shares of Macerich edged up 0.98% during afterhours trading on the NYSE. Shares moved up 0.2% in the regular hours.
Both Macerich and Simon Property currently have a Zacks Rank #2 (Buy).
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