DeBartolo mall empire going public Developer hopes REIT will raise $646 million

BOARDMAN, OHIO — BOARDMAN, Ohio -- Edward J. DeBartolo's cash-starved shopping mall empire, following a pack of retail developers, is going public with the largest offering of a property-owning real estate investment trust to date.

DeBartolo Realty Corp., a newly formed real estate investment trust, announced plans yesterday for an initial public offering that would raise up to $646 million and give the public a stake in 51 retail malls and seven strip shopping centers.


The Edward J. DeBartolo Corp. owns or manages 70 malls and 21 strip shopping centers.

DeBartolo Realty said it filed a registration statement Tuesday .. with the Securities and Exchange Commission to sell 31.6 million shares of common stock. Proceeds would be used to purchase a 51 percent general partnership interest in DeBartolo Properties Partnership L.P. and reduce DeBartolo's debt.


With the conversion, Mr. DeBartolo's company will become yet another real estate developer to break from traditional sources of capital, such as banks and insurance companies.

The rush to take America's traditionally privately owned real estate companies public came when the easy lending of the 1980s brought overbuilding, which resulted in the crash in commercial real estate. When values of real estate investments plummeted, the traditional lenders fled, leaving would-be borrowers desperate for money.

The DeBartolo offering is notable not only for its large size but also for the history of the company.

Edward J. DeBartolo, now 84, founded the Edward J. DeBartolo Corp. in 1944, and it grew into one of the biggest operators of regional and other shopping malls in the United States.

But in 1991, the company, based in Boardman, Ohio, sought relief from its bank debt amid serious problems that were made worse by the collapse of the commercial real estate market. Among the company's much-publicized financial problems was a million loan made in 1988 to Federated Department Stores, then owned by the Campeau Corp. of Canada, which would later seek bankruptcy-law protection.

Five other shopping mall owners have begun public offerings in the last year, but the DeBartolo one is by far the biggest. In second place is Crown American, which raised $423.3 million this summer.

Mr. DeBartolo's retail group posted net losses of $27.7 million in 1992 and $22.4 million in 1991, according to the SEC filing. His other holdings include three race tracks, hotels and office towers, Ralphs Supermarkets, Inc., Fun-N-Games family amusement centers and the San Francisco 49ers football team.

He sold the Pittsburgh Penguins hockey team in 1991 because of his company's financial problems.


"He's joining the herd because it makes sense to join the herd," said Fred Carr, a principal in the Penobscot Group, a Boston-based independent real estate securities firm. "At this pace, there may not be many malls that aren't owned by a public REIT in the next few years."

The popularity of REITs, which can produce yields above 7 percent, shows no sign of waning. So far this year, 21 REITs have raised a record $4 billion in initial public offerings, and the year-end total could swell to $12 billion, industry experts said.

A DeBartolo spokeswoman said she could not provide more details on the planned offering. The SEC filing mentions an assumed stock price of $19 a share. The spokeswoman said the offering would occur before the end of this year.

The IPO would leave the DeBartolo family owning 48 percent of the partnership. Edward DeBartolo Jr. would serve as the new company's chairman, the Wall Street Journal reported.