San Rafael’s Northgate mall sold to Merlone Geier Partners

Whitney Strotz, Economic Forensics Analytics, Robert Eyler, Haden Ongaro, Sears, Macy's, Merlone Geier, Newmark Cornish & Carey,

By Richard Halstead
Marin Independent Journal

The Mall at Northgate in San Rafael has been sold by Santa Monica-based Macerich Co. to Merlone Geier Partners, a private real estate investment firm based in San Francisco.

Macerich said that Merlone Geier bought Northgate together with Cascade Mall in Burlington, Washington for $170 million, according to a press release issued this week. The release did not say how much Merlone Geier paid for Northgate alone. Macerich representatives did not return calls. A Merlone Geier representative, Katrina Davidson, declined to comment.

“Both of the properties Merlone Geier acquired were performing under the average for Macerich shopping centers,” said Whitney Strotz, a commercial Realtor with Cushman & Wakefield, based in Larkspur. “I think part of Macerich’s strategy is to divest of some of its properties that are underperforming.”

The Macerich release stated that “as of Sept. 30, 2016, Cascade and Northgate generated sales per square foot of $319 and $421, respectively, and had occupancy rates of 86.5 percent and 94.9 percent, respectively.”

According to the statement, “These figures compare to Macerich portfolio averages of $626 per square foot in sales and 95.3 percent occupancy at 9/30/16.”

Garrick Brown, Cushman & Wakefield’s vice president of retail research for the Americas, said, “It doesn’t surprise me. The last two years, Macerich has really been trimming its portfolio of malls down, getting rid of anything that isn’t Class A or trophy.”

Brown said the wave of mall closures sweeping the country has usually involved Class B and C properties. Brown said Northgate would be regarded as a Class B mall while Cascade would fall into the Class C category. He speculated that a majority of the $170 million mentioned in the release was paid for Northgate. Macerich purchased Northgate in 1985 for $36 million.

Robert Eyler, chief economist with the Marin Economic Forum, said, “There is no doubt about the fact that both Sears and Macy’s, who are anchors in the Northgate mall, have recently announced some corporate threat in terms of their real estate holdings. That would make me a bit nervous.”

Macy’s announced in August that it plans to close 100 stores nationwide and in January it released the locations of 68 of those stores. In January, Sears announced that it plans to close 150 stores by early 2017.

But Strotz said, “I don’t believe either of the Northgate mall stores were touched by those announcements.”

Tom Adams, San Rafael’s economic development director, said Northgate accounts for about 5 percent of San Rafael’s annual $18 million in sales tax revenue, making it one of the city’s top five producers of sales tax revenue.

“We’re optimistic about having somebody that is new and eager to reposition portions of the center,” Adams said. “I don’t think it is any big surprise that Sears has been having trouble over the past five years. This may be an opportunity.”

Brown said, “I would say Merlone Geier got a pretty good deal on this. Northgate is a salvageable mall if you can put some money into it and reposition it.

“Someone can make a lot of money on it, if they can usher it into a new era,” he said, “simply because it is so difficult to build anything in the North Bay. But you’re probably going to want to reposition it away from being a mall eventually.”

Brown added, “The thing to remember about Merlone Geier is their specialty is power centers and neighborhood centers — not so much your classic enclosed mall but your outdoor, big box-anchored center, usually anchored by a Target superstore or Walmart superstore.”

Haden Ongaro, executive vice president at Newmark Cornish & Carey in San Rafael, said, “My opinion is there is upside with Northgate mall given the developments in Marin — with rents increasing and having a SMART train station across from the mall.”