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Forest City Divests Philadelphia Shopping Center for $92.3M

Cedar Realty Trust Acquires 456,000-SF Quartermaster Plaza
March 27, 2014
Forest City Enterprises, Inc. (NYSE: FCEA, FCEB) has sold the Quartermaster Plaza retail power center at 2200-2370 W. Oregon Ave. in Philadelphia, PA to Cedar Realty Trust, Inc. (NYSE: CDR) for $92.3 million, or about $202 per square foot.

The 456,364-square-foot, grocery-anchored shopping center was built in 2004 on more than 43 acres in the South Philadelphia submarket. At the time of sale, the asset was 98 percent occupied, anchored by BJ's Wholesale Club, Home Depot, Staples, PetSmart and Walgreen's. A proposed expansion could see an additional 98,000 square feet added to the center with in-place approvals.

The sales price represents a CAP rate of 6.5% based on projected 2014 net operating income. The acquisition was funded in-part with the assumption of $53.4 million in existing fixed-rate debt, anticipated proceeds from future asset sales, and the buyer's credit facility.

As a result of the sale, Forest City realized net cash proceeds of approximately $21.5 million.

"We're pleased with this transaction and the market valuation of the property," said David J. LaRue, Forest City president and chief executive officer. "We continue to execute on our strategy of focusing our retail assets around a portfolio of high-productivity regional malls as well as specialty retail in New York City. Proceeds from divestiture of non-core assets are used to reduce debt, invest in our mature portfolio and activate new development opportunities in core markets."

Located immediately adjacent to Cedar's 283,000-square-foot, grocery-anchored South Philadelphia Shopping Center, the newest acquisition brings the firm's holdings to 739,000 square feet, representing 22 percent of the South Philadelphia retail submarket. Cedar now owns five shopping centers in Philadelphia totaling 1.3 million square feet, making it the largest owner of open air shopping centers in Philadelphia of any public shopping center REIT.

"We are excited about the acquisition of Quartermaster Plaza. The acquisition fits perfectly into our Washington DC to Boston footprint and is consistent with our evolving view of the grocery business," said Bruce Schanzer, president and chief executive officer. "Our now dominant presence in the South Philadelphia submarket allows us to leverage our operating and leasing expertise to continue to serve the needs of this large and growing urban population."

Both parties handled the direct sale in-house.

Please see CoStar COMPS #2987015 for additional information on this transaction.

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