The largest privately-owned regional mall portfolio in seven years may be about to hit the market. The Pyramid Companies, a Syracuse, N.Y.-based privately held developer which owned 19.5 million square feet of retail space as of April 2006, said earlier this week that it is exploring selling all but one of its 20 properties. If it sells the portfolio, Pyramid would shift its focus to its long-proposed project of transforming the 1.6-million-square-foot Carousel Center in Syracuse, N.Y. into a 4.5-million-square-foot retail and entertainment site called DestiNY USA.

Pyramid will have no shortage of bidders as every major mall operator in the country will try to get its hands on the rare portfolio, says Richard Moore, a REIT analyst with RBC Capital Markets. With the centers totaling about 18 million square feet in markets with high barriers to entry, Pyramid could easily fetch close to $4 billion, estimates Joseph French, a national director of retail with Sperry Van Ness, a real estate investment brokerage firm. Among the likely contenders could be Simon Property Group, General Growth Properties, the Macerich Company and CBL & Associates.

Moore says it is also possible that Brookfield Asset Management Inc., a Canadian office REIT that attempted to acquire Mills Corp. earlier this year, could make a push for the Pyramid portfolio in an effort to expand its retail holdings.

In addition, there might be a private equity investor or two among the bidders, according to David Leibowitz, an analyst with New York-based Burnham Securities, Inc. With private equity real estate funds set to surpass $60 billion this year, according to Private Equity Real Estate magazine, they will have plenty of money to buy the portfolio and then flip it at a premium shortly thereafter. “There are several motivated buyers in the REIT sector, but it is clear that the retail segment is proving to have an irresistible lure for both private equity and established REITs to expand their portfolios,” Leibowitz says.

Moore, however, discounts the idea that a private equity player will outbid the REITs – “that might happen in the industrial or the office sector,” he notes, “but not with regional malls. The REITs will offer the best prices they can.”

Pyramid has already secured the services of Goldman Sachs & Co. to review its strategic alternatives that could take one of several routes, including a refinancing package, says Tim Ahern, independent trustee for the Congel family, which owns a controlling stake in the company. The company, which has resisted selling its portfolio or going public for years, now is ready to take advantage of the high values regional malls are fetching. “There is tremendous interest today in the regional and super-regional center classification of assets and we wanted to consider what our alternatives were,” Ahern says.

There also may be estate planning concerns, as there were the last time a private portfolio of this size traded hands when CBL & Associates Properties purchased 21 malls from Richard E. Jacobs Group for $1.2 billion in the fall of 2000. French speculates that Pyramid CEO Robert Congel, 71 may be thinking about retiring.

“Mr. Congel is getting older and it’s an excellent time to sell if you are thinking about getting out of the business,” French notes. “It’s more than likely that the market is going to get softer [going forward] rather than stronger.”

With most of the country’s regional malls already controlled by REITs, large portfolios like Pyramid’s have become few and far between.

Since the CBL/Jacobs deal in 2000, the majority of big acquisitions in the retail REIT world, including General Growth Properties’ $12 billion purchase of Rouse Co. in 2004, have come from mergers and acquisitions. Two exceptions were the Macerich Company’s $1.5 billion acquisition of Westcor Partners in July 2002 and its $2.333 billion acquisition of Wilmorite Properties, Inc. and Wilmorite Holdings L.P. in December 2004. Westcor’s portfolio contained 10 regional malls, 18 urban centers and six specialty centers and totaled 15.6 million square feet. The Wilmorite portfolio contained 11 regional malls and two open-air community centers, totaling 13.4 million square feet of retail space.

-- Elaine Misonzhnik