THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: THURSDAY, June 23, 1994 TAG: 9406230408
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: By MYLENE MANGALINDAN, STAFF WRITER
DATELINE: 940623 LENGTH: Medium
Two prominent real estate management companies, from Minnesota and North Carolina, will bid by the end of the month to manage the Norfolk mall.
{REST} The current mall manager, Rouse Co. of Maryland, owns a stake in Military Circle and wants to sell off its interest to its two partners. It is hoped that the management restructuring will invigorate the aging mall, which, industry analysts say, has been fighting perceptions of high crime.
``Military Circle has been going through a transition,'' said Jeffrey Doxey, Virginia operations chairman of the International Council of Shopping Centers. Some perceive the mall as a ``flak-jacket'' area, he said.
Faison Associates of Charlotte and General Growth Management Inc. of Minneapolis have been named as the main contenders to succeed Rouse, the shopping center's manager said.
``We have agreed to disagree with our partners at Military Circle,'' said John Johnson, vice president and general manager at the Rouse Co., which manages the mall. ``They will have a new management company taking over in July or August.''
Military Circle, which covers more than 940,000 square feet of retail space, is primarily co-owned by Daichi Kangyo and Morgan Investments, a division of J.P. Morgan & Co., through a third party entity titled Military Circle Limited Partnership. The Rouse Co., a publicly owned Maryland company with office and retail holdings throughout most of the country, owns a small percentage of the shopping center.
``We are in the process of buying out Rouse's interest in the shopping center, and I'm not interested in making a comment at this time,'' said Cheryl Crosland, a portfolio manager responsible for Military Circle at J.P. Morgan & Co.
``They are buying us out of our interest in the mall,'' Johnson added.
Military Circle Limited Partnership owns property worth more than $62 million, according to records at the Norfolk city assessor's office. The mall and its anchor stores are worth $52.7 million for the land and building space they occupy.
The partnership's holdings include the land and buildings occupied by nearby businesses adjacent to the mall including the Signet Bank, the Circle Four Theatres, and the Shoppes. Ten parcels of vacant land surrounding the center also belong to the partnership.
The two companies competing for an interest in Military Circle are commercial real estate veterans eager to get a foothold in Hampton Roads. Both Faison and General Growth have tried to enter this market for some time, previously wrestling for the management of Lynnhaven Mall in Virginia Beach.
``We've been interested in this market for a while,'' said Jimmy Culpepper, a Faison partner in charge of retail services.
A privately owned company founded in 1966, Faison has built up a name as a regional mall manager and prominent commercial real estate pioneer, industry experts said. Its holdings comprise 53 million square feet of office and retail space in states as far as Texas, Wisconsin, Florida and Maryland.
Culpepper was reluctant to talk about the bidding process.
``We've summited a RFP,'' or request for proposal, he said. ``Our bid is for the leasing and management proposal, period.'' He implied that his company had no interest in owning a stake in Military.
Faison's competition brings equally impressive credentials to the negotiations.
Self-touted as the nation's largest third-party shopping center manager, General Growth oversees 76 regional malls nationwide from Honolulu's Ala Moana Center to Harrisonburg Valley Mall in Virginia. Formerly a family-owned company, General Growth became a real estate investment trust, essentially a property mutual fund, after filing a public offering.
John Millar, an executive vice president in charge of development at General Growth, declined to comment on Military Circle, saying it was too premature.
``If you call me back after July 1, I'll a really good story then,'' he said.
Like the commercial real estate market, shopping centers have reached a ``mature phase,'' said Mark Schoifet, spokesman for the International Council of Shopping Centers in New York.
An explosion of overbuilding in the '80s, along with the recession and credit crunch in 1990-91, caused the slowdown in shopping center development, he said. Secondary and tertiary malls, like Military Circle, are being challenged by outlet malls, free-standing superstores, home shopping and other different consumer venues.
``The days of `If you build it, they will come,' are over,'' Schoifet said. ``It's a constantly evolving science.''
by CNB