Feldman Equities

Thursday, April 11, 2002

Investor Group Buys Tucson, Ariz.-Area Mall

By Jeannine Relly

A real estate development and investment company and several other investors have purchased the northwest Side Foothills Mall in a $ 54 million deal, officials said Wednesday.

Hillwood and the General Electric Capital Corp., sold the mall and five pad sites to six investors and Feldman Equities of Arizona LLC, the operating arm of a New York-based investor and developer of retail and office properties -- most in Arizona and Florida.

"We think our timing is excellent with the growth in Northwest Tucson," said Scott Jensen, a partner with Feldman Equities in Phoenix.

The new owners plan to invest $ 4.5 million to renovate, upgrade, expand and promote the mall at the northwest corner of North La Cholla Boulevard and West Ina Road. The new owners will build the space for three new anchor stores, add up to three restaurants and get tenants for the five pads in the next one to two years. The owners also plan to add women's apparel and sporting goods stores and shops that appeal to Generation Y consumers -- those between 7 and 24 years old, Jensen said. Bourn Properties Inc., manager of the 480,000-square-foot property during the mall's expansion and rebirth in the late 1990s, will no longer manage the center. About 30 mall employees were retained by Feldman Equities which now will operate the center, Jensen said.

The sale comes slightly more than three years after Hillwood and GE Capital snapped up the mall -- on about 60 acres along with 30 additional acres of vacant land for $ 43.7 million. Hillwood, a Dallas-based real estate development and investment company, is headed by Ross Perot Jr., son of former third-party presidential candidate/Texas billionaire H. Ross Perot.

In December 1999, Hillwood and its investment partner sold 19 acres to Wal-Mart for an undisclosed sum.

"We're basically opportunistic investors," said Steven Howard, vice president of Hillwood Investments. The mall property had been for sale for one year.

When Hillwood and GE Capital picked up the mall in December 1998, it was 80 percent occupied. This week it was 95 percent occupied.

Excluding the center's anchors, Foothills Mall last year had sales of $ 230 per square foot, according to the Directory of Major Malls. The national mall average without anchors last year was $ 336 per square foot, it said.

Federated Department Stores spent an estimated $ 30 million building Foothills Mall, which opened in 1982 with Levy's and Goldwater's department stores. By the early 1990s, business at the mall was sagging. Both anchors -- Foley's and Dillard's -- left the mall in 1994.

Bourn Properties, under the ownership of Cecil Van Tuyl, a Kansas City, Mo., car dealer and investor, fashioned a remake of the property with an "outlets and entertainment" theme and pulled in stores such as Barnes & Noble Booksellers, a 15-screen Loews Cineplex Odeon and Off 5th -- Saks Fifth Avenue Outlet.

The mall has been owned or managed by a department store chain, a pension fund and investment and development groups with wide-ranging interests from land speculation to shopping center development.

Feldman Equities of Arizona is the operating arm of Feldman Equities Inc. in Floral Park, N.Y. The company has developed or acquired office and retail properties with an aggregate value of more than $ 2 billion.

Feldman acquired the mall with longtime Arizona partners Jensen and James Bourg as well as Paul and Bruce Ash of Paul Ash Management Co. LLC and two silent partners. Ash Management is a multifamily and commercial real estate company in Tucson.

The mall went from 50 stores with sales revenues of more than $ 36 million in 1997 to 65 stores last year with sales of more than $ 85 million, said Tom Rae, general manager of the Foothills Mall.

Today, fewer than one-fourth of the retailers in the mall are outlet stores, Jensen said. Retail experts categorized the property as a "value-oriented" shopping center, with its mix of outlet and discount stores and other retailers.

The number of U.S. outlet centers, those that only sell goods from the manufacturer, tripled from 1987 to the mid-1990s, according to Value Retail News, a Clearwater, Fla.-based monthly trade industry publication. Since 1996, however, the number of such centers has dropped from 329 to 278.

"Value-oriented" shopping centers, those with a mix of outlet and discount stores, have risen in popularity, said Patrice Duker, a spokeswoman for the International Council of Shopping Centers in New York City. "What we're seeing because of the recession is people are going toward the discount stores for more value."