AVG Newsletter 2012 Q1 Winter FINAL

8/3/2019 AVG Newsletter 2012 Q1 Winter FINAL

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A Professional Courtesy of:

207 Abbey LaneLansdale, Pennsylvania 19446

215-855-1800

5201 Ocean Avenue #2007Wildwood, New Jersey 08260

215-990-6663

www.ameri-val.com Specializing in Real Estate Appraisal and Property Tax Consulting

WI NTER 2012

In This Issue:

Blackstone Buys Mall Portfolio

Sears Closing 100 to 120 Stores

GGP Sells Faneuil Hall

Outlet Center Planned at National Harbor MD

FL Shopping Center Sold

Philadelphia Area 2011 Transactions

Recent Transactions

Recent Assignment

Blackstone Buys Mall Portfolio

In January 2012, Blackstone Group LP (BX) and DDR Corp. (DDR) agreed to purchase 46 U.S.shopping centers from an affiliate of Israel's Elbit Imaging Ltd. (EMIT) for $1.43 billion amid an

improvement in retail leasing. Blackstone Real Estate Partners VII, a fund managed by the New York-based private-equity firm, will own 95 percent of a venture formed to buy the properties, with the restowned by an affiliate of DDR, a Beachwood, Ohio-based real estate investment trust, according to acompany statement.

The retail centers are being sold by EPN Group, an affiliate of Tel Aviv-based Elbit. The purchase priceincludes assumed debt of $640 million and at least $305 million of new financing, according to thestatement. DDR also will invest $150 million in preferred equity in the venture and provide leasing andmanagement services.

U.S. shopping centers had their first net gain in occupied space in four years in the fourth quarter 2011as consumer confidence and job growth began to strengthen, according to Reis Inc., a national research

of 5Income Property Valuation Digest - Winter 2012



firm. Landlords have struggled since the recession that ended in 2009 after weak sales drove more thana dozen retailers to file for bankruptcy protection and online stores captured more sales.

Sears Closing 100 to 120 Stores

Sears Holdings Corp., which announced Tuesday that it would close between 100 and 120 of its Searsand Kmart locations nationwide as part of a business restructuring. So far, a list of 79 locations that itwould close has been released. Sears Holdings said it would update the closing list at a later date.

With one of the nation's oldest retailers poised toclose 120 stores, it's fair to ask the bigger question -is there a place for Sears as a brand? As adepartment store specializing in hard goods, Sears isbattered from one end by Lowe's, Home Depot andBest Buy, from another by Target and Wal-Mart andultimately must fight Amazon for Internet sales. All ofthose companies have clearer brand missions - andsome of them have questionable futures as well. Sowhere does Sears fit? It may be helpful to rememberthat Sears originally found success by laying wasteto an existing industry - the General Store. TheSears & Roebuck catalog became a standard thatdefined market prices for many goods.

So what is happening to Sears - admittedly helped by inept management - is very similar to what Searsitself created. The core assets of the Sears brand are sub-brands, two in particular: Kenmore andCraftsman. They have been somewhat damaged by foolish outsourcing but are still relatively strong withconsumers. Both sub-brands have a reputation for durability and dependability. Other than Home Depot(which has suffered through foolish management of its own), Sears is the unique among its competitorsin projecting a strongly male image. This points to one possible path for the brand. Sears is still adepartment store, a one-stop shop for everything from clothing (it owns Lands End) to tools. It appealsmost strongly to men. As Lowe's and Best Buy have illustrated, customer service counts when sellinghome improvement or big-box items. If Sears strongly targeted the Wal-Mart Dad, they might have a shot- from a branding perspective at least.

In truth, the prospects for Sears are not very good. But it is an incredibly deep brand, with a heritage thatis vastly under-leveraged. Still, shed of the worst real-estate and with an infusion of capital and commonsense, a refashioned Sears might still have a place in the heartland of American brands.

GGP Sells Faneuil Hall

In October 2011, General Growth Properties Inc. (GGP), the No 2. U.S. mall owner, announced that ithad sold Faneuil Hall Marketplace, a shopping and dining complex in Boston, for $140 million. Thetransaction was one of three sales of "non-core" assets completed in the last three months, the Chicago-based company said in a statement today. General Growth also sold the office and garage components

of Westlake Center in Seattle for $119 million and Riverside Plaza, a strip shopping center in Provo,Utah, for $21 million. The buyers weren't disclosed.

As reported by Bloomberg, "We continue to execute our investment strategy of focusing on our regionalmall portfolio," Shobi Khan, General Growth's chief operating officer, said in the statement. "Theserecent dispositions strengthen our balance sheet." The deals helped the company eliminate $95 millionof mortgage-related debt associated with the properties, according to the statement. General Growth,which left bankruptcy protection in November, is the second biggest U.S. shopping mall owner afterSimon Property Group Inc. In August, General Growth said it would spin off 30 malls to shareholdersthrough a special dividend and that they would be transferred to a new publicly traded real estateinvestment trust, Rouse Properties Inc. (NYSE: RSE).




Outlet Center Planned at National Harbor MD

In January, Tanger Factory Outlet Centers, Inc. and The Peterson Companies released the first sketchesof the very first mega outlet mall just across the Potomac River. Tanger and Peterson entered into anagreement in May 2011 to form an exclusive joint venture for the development, management and leasingof the $100 million Tanger Outlets opening in 2013 at National Harbor.

This first-class retail destination will be a tremendous complement to the existing retail, restaurant andresort offerings at National Harbor. National Harbor already includes scores of fine restaurants,distinctive retail, office and residences, and a number of world-class hotels including the GaylordNational Resort and Convention Center. Developed by The Peterson Companies, National Harbor is 350acres of prime real estate along the scenic Potomac River in Prince George's County.

It is anticipated that the joint venture will develop an approximately 40 acre parcel at National Harboroffering easy access to I-495, I-95, I-295 and the Woodrow Wilson Bridge. The resulting Tanger OutletCenter is expected to house approximately 80 outlet designer and name brand stores in a centermeasuring up to 350,000 square feet.

FL Shopping Center Sold

A subsidiary of Inland Diversified Real Estate Trust, Inc. has acquired the 171,297 square foot PalmCoast Landing shopping center in Palm Coast, Fla. for $40.4 million. The cap rate for Palm CoastLanding was 6.52 percent. Palm Coast Landing is fully leased to twenty-eight tenants, including RossDress for Less, TJ Maxx, PetSmart, Michael's and Books-A-Million. The property is shadow-anchored bya SuperTarget, which was not part of the acquisition.

Palm Coast, FL is in Flagler Co., about 60 miles south of Jacksonville, and 30 miles north of DaytonaBeach. Reportedly, Inland does not intend to make significant renovations or improvements to theproperty, which has six competitive properties within ten miles. According to the property's website, itwas previously owned by Houston-based Weingarten Realty Trust. The center celebrated its grandopening in August 2008.

Philadelphia Area 2011 Transactions

While multifamily was the hot property type that traded last year, office, retail and industrial laggedbehind. Here's a look back at some of the top deals in the Philadelphia area:

Simon Property Group took control of the 2.4-million-square-foot King of Prussia Mall in atransaction valued at around $1.25 billion, which was the largest transaction from last year interms of dollars and square feet.




David Werner Real Estate Investments paid $143.5 million for1700 Market Street, an 841,000-square-foot office building inPhiladelphia.

An affiliate of the Morris Cos. of Rutherford, N.J., boughtAshbridge Square, a 386,016-square-foot shopping center at900 E. Lancaster Ave. in Downingtown, PA for $51.75 million.

An affiliate of Post Brothers Apartments bought the old EmpirianLuxury Towers at 633 W. Rittenhouse St. in Philadelphia for$27.3 million.

BPG Properties Ltd. sold Executive Terrace, a four-story,132,089-square foot office building at 455 S. Gulph Road in Kingof Prussia, PA for $26.5 million.

Home Properties paid $24 million for Waterview Apartments, a203-unit apartment complex fronting Route 3 at Waterview Roadin West Chester from Fairfield Residential Inc.

Bart Blatstein's Tower Investments paid $21 million to buy 1400Spring Garden St., a 19-story building totaling 300,000 square feet that has a 208-space parkinggarage from the state. Tower also paid $22.65 million to buy the Philadelphia Inquirer and DailyNews' old headquarters at 400 N. Broad St., an 18-story, 470,000-square-foot building.

SI Organization Inc. bought the 271,000-square-foot building it occupies at 751 Vandenburg Roadin King of Prussia, PA for $21.4 million. The building was constructed in 1967. Lockheed Martinsold its Enterprise Integration Group division in November 2010. When Lockheed divested itself ofEIG, it was renamed SI Organization, which quietly supports the intelligence community on theirmissions.

Federal Realty Trust sold the Feasterville Shopping Center, a 110,362-square-foot strip at 1045Bustleton Pike in Feasterville, PA for $20 million.

Recent Transactions

In a free and clear deal, Toronto-based RioCan and Inland Western Retail REIT have acquired the465,000-square-foot Alamo Ranch in San Antonio for $93 million. The going-in cap rate is 7.2 percent.The deal closed December 2011 with RioCan entering into a $67.5 million bank credit facility to fund its80 percent stake in the three-year-old development in San Antonio. Alamo Ranch is RioCan's firstinvestment in San Antonio. The JV partners are in the process of securing conventional third-partyfinancing. The shopping center is 88% leased and has a weighted average lease term of 6.6 years. It isshadow anchored by Target, and Lowe's. Major tenants at the property include Best Buy, Marshalls,Ross Dress for Less, and Dick's Sporting Goods. RioCan is targeting acquisitions in all four metropolitanmarkets of Texas.

Village Shoppes of Salem, a 170,270 square foot, fully occupiedpower center in Salem, NH, has sold for $39.875 million. CBRErepresented the seller, Clarion Partners, and procured the buyer,Route 28 Salem, LP. Located along the busy Route 28 corridor(40,000 CPD) in the heart of this super-regional, tax-free market,Village Shoppes of Salem is currently 100% occupied by tenantsincluding Best Buy, Sports Authority, DSW, PetSmart andMichaels. Village Shoppes of Salem, built in 1999, took over sixyears to develop and even now, 12 years later, stands as the

newest strip shopping center in the market. Salem is located 28 miles north of downtown Boston alongInterstate 93.

The buyer is an affiliate of RioCan Real Estate Investment Trust, a Canadian REIT. RioCan purchased a100% interest in the property at a 7.0 percent cap rate. The buyer assumed existing secured debt of$17.8 million that carries an interest rate of 6.2% and is scheduled to mature in December 2012. CedarShopping Centers, Inc. will provide property management services. RioCan has now purchased an




interest in a total of 38 income properties at an aggregate purchase price of $1.1 billion at a weightedaverage cap rate of 6.7 percent.

Recent Assignment

American Valuation Group, Inc. announced in December that the company was retained to provideappraisal services and expert witness testimony on River Ridge Mall, a super-regional shopping malllocated in Lynchburg, Virginia. The 763,797 square foot one-level, enclosed mall, which opened in 1980,renovated in 1996 and 2000, and expanded in 2009, is situated between U.S. Highway 29 and U.S.Highway 460 at Candlers Mountain Road. This location is east of Roanoke, Virginia. River Ridge Mall isthe only enclosed regional shopping center within a 55-mile radius, and is less than three miles awayfrom the Lynchburg Regional Airport. Lynchburg is in a fast-growing region, and is home to LibertyUniversity, the fastest growing Christian university in the world with more than 12,000 full-time students.The mall is anchored by Belk, Macy's, JCPenney, Sears, and Regal Cinema (14 screens).

River Ridge Mall has an impressive collection ofstores and family-friendly features and is thedominant mall in its trade area due to size, locationand tenant mix. In addition to the anchor stores, themall is home to over 80 stores and restaurantsincluding Aéropostale, American Eagle Outfitters,Bath & Body Works, Body Central, Christopher &Banks, C.J. Banks, Forever 21, Hot Topic, New York& Company, Victoria's Secret, Wet Seal and YankeeCandle Co. There are seven food court spaces. CBL& Associates Properties, Inc., one of the nation'slargest publicly-traded real estate investment trusts,owns the mall and handles leasing andmanagement.

American Valuation Group, Inc. has been retained for appraisal services and expert testimony for a five-year tax appeal litigation proceeding.

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American Valuation Group, Inc

207 Abbey Lane, Lansdale, PA 19446 | Phone: 215-855-1800

This quarterly newsletter is brought to you as a professional courtesy of Mark T. Kenney.Copyright © 2012 - American Valuation Group, Inc.


AVG Newsletter 2012 Q1 Winter FINAL

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