German mogul buys DDR stock
Two big developments in the Pabst Farm saga unfolded this week: news that the shopping development might be delayed another year and that a large German mall magnate is buying a stake in DDR, the developer of the Oconomowoc project.
Pabst Farm Spokesman Thad Nation has stuck to his guns on a 2010 opening for the past couple of years, but during a Tuesday business luncheon for Oconomowoc chamber members, Developers Diversified Realty Director of Development Bob Elias mentioned a 2011 date for Pabst Farm Town Centre for the first time publically.
On the same day, ECE Projektmanagement of Germany announced it will increase its ownership of DDR's shares to 36 million common shares, which is an excess of 20 percent. The sale will make the European mall developer DDR's largest individual shareholder.
DDR held the meeting at the chamber event in an effort to gain support from the group on its plan for the shopping center. DDR touted enhanced architecture; diverse, creative building fronts; extensive landscaping and background music as ways the Town Centre a shopping experience will be like no other; one that keeps people coming back.
Architect Steve Smith of Steven Perry Smith Architects, who has worked with Pabst Farms to design the M&I Bank, the Market Place and the Hilton Garden Inn, approves of the Town Centre design, saying it is like no other shopping center in the area.
Landscaping is missing in shopping centers today and the signs are repetitive and boring, Smith said, but not at Pabst Farms. The Town Centre Green, a public gathering place in the shopping center was touted as a huge asset to the design. DDR said it would serve as a gathering place for every type of shopper and a space for community events. DDR used examples of success at similar social areas at malls in Texas, Florida and California. Members questioned the viability of the spot in a Wisconsin climate when inches of snow would cover the area. DDR's answer was that ice sculptures and winter activities could then be planned.
DDR Development Vice President Dan Herman said the challenges developers face due to the economy are significant. He said 50 to 70 percent of the storefronts would have to be leased in advance before a bank would lend money for the mall's construction. "The era of building a retail space and then looking for tenants is over," Herman said. When asked about potential big box stores anchoring the development, DDR said larger tenants need to be established before the boutique shops would sign on.
The progress of the interchange at I-94 and Highway P was questioned. Pabst Development Manager Dan Warren said noticeable work will begin soon. He said bids for construction of the $25 million interchange will be let in November and that the state has already spent $5 million to $6 million on the interchange. Even though these parts are moving ahead, Waukesha County is still skeptical that the center will be a regional draw. Officials have said it will match Pabst's $1.75 million contribution to the interchange depending on whether the Town Centre is determined to be a regional draw.
Separate from the meeting, news broke Tuesday about Alexander Otto and his family who own ECE, a developer of inner-city shopping centers. They manage 111 malls in 15 central and European countries. Otto is also the largest shareholder of German company Deutsche EuroShop AG, which owns 16 shopping centers valued at more than $2 billion.
On ECE's Web site, ece.com/en/home/, Otto said, "I am delighted that we win a highly competent partner on the world's largest retail market. We were therefore able to capture the chance to further advance our global expansion in a demanding market environment. From our shareholding, I expect a considerable exchange of knowhow. We have already worked together very good with this competent team of DDR and now we would be pleased to extend this cooperation."
DDR already manages retail operating properties in 45 states, Puerto Rico, Brazil and Canada. The 710 properties comprise a total of 14.6 million square meters.
DDR Chief Executive Officer Scott Wolstein said, "Not only does the transaction offer the unique opportunity for us to profit from the common knowledge, but also to reduce leverage and improve liquidity." Wolstein also said the sale will provide capital for debt reduction.
Director of Economic Development Bob Duffy said the sale is definitely a positive for the Pabst development. "Not knowing the details, I do think it sends a pretty strong message that there are others interested in investing in their company in the global market," Duffy said. "It is an interesting concept to watch and to attract an investor is a positive that shows they have some recognition."
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