Cedar Acquires $134m of Property from Pennsylvania REIT
Cedar Shopping Centers, Inc. (CDR) announced Monday that the company, on behalf of a joint venture with RioCan Real Estate Investment Trust of Toronto, is purchasing five anchored shopping centers from Pennsylvania Real Estate Investment Trust (PREIT) (PEI). The transaction will cost approximately $134m. PREIT reported it will use a portion of the proceeds to repay a $40m mortgage debt secured by three of the properties and to release two of the properties securing PREIT's credit facility for an estimated $57m. Cedar and RioCan are purchasing the properties under a joint venture initiated in late 2009 that gave Canadian RioCan entrance into the US market. Cedar will own 20% of the deal and RioCan will own 80%. All the properties PREIT sold are fairly new and similar in commercial content. Three of the five newly acquired properties are located in Pennsylvania, while one property is located in New Jersey and another is located in Virginia. All five properties have a total occupancy rate of 97% The Cedar/RioCan partnership also agreed to purchase contracts for a sixth property and seventh property owned by PREIT, splitting the ownership investment 50% and 50%. The close on both agreements are subject to an agreement with a third-party joint venture partner of PREIT and are expected to close during the fourth quarter of 2010 or the first quarter of 2011. Both properties are located in Pennsylvania. If the deal follows through, it will put the total purchase price at approximately $2000m, exclusive of closing costs and adjustments. PREIT's share of the sales prices for the two properties is approximately $34m, and PREIT's proportionate share of the mortgage debt on these properties is approximately $18m. One property is currently at 85% occupancy and the other is at 92%. According to RioCan, the prospective portfolio's weighted average remaining lease term is about 9.2 years and the average lease rate is $10.06 per square foot. The firm's initial purchasing price for the first five properties is $107m at RioCan's interest. For all seven properties, the aggregate price is $150m at RioCan's interest. "This portfolio of new format retail and grocery anchored retail centers in well established markets represents an excellent opportunity for RioCan to expand its portfolio in the Northeastern US at an attractive cap rate and with an excellent opportunity to realize additional growth through leasing," said RioCan president and CEO Edward Sonshine. Write to Christine Ricciardi. The author holds no relevant investments.