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QIC To Acquire Interests in Portfolio of 10 U.S. Regional Malls

Australian Investment Fund Acquiring Forest City’s JV Interests in $3.175 Billion Portfolio
October 4, 2017
QIC, a government owned investment company owned by the Queensland (Australia) Government, is expanding its real estate investment in the U.S. by acquiring additional interests of its joint venture partner, Forest City Realty Capital (NYSE: FCEA), in 10 U.S. regional shopping malls on behalf of a QIC client.

The portfolio is valued at $3.175 billion.

QIC and Forest City have been joint venture partners in the portfolio since 2013.

"We are building off more than a decade of amassing market intelligence and understanding in the U.S. retail sector," said Steve Leigh, managing director of global real estate for QIC. "We view the U.S. real estate market and the retail sector in particular as a strong investment opportunity. We are encouraged by the broader economic conditions in the U.S. and the resilience of the consumer as demonstrated by continuing strength in the underlying fundamentals for the portfolio. We understand the importance of regional malls to their local communities and have the capability and the capital to evolve these assets into multi-faceted destinations," he said.

The transaction will be completed in two tranches with the transfer of interests in the first six malls expected to complete by the end of the year.

The assets in the first batch include:
  • The Shops at Northfield Stapleton in Denver, CO;
  • Westchester's Ridge Hill in Yonkers, NY;
  • The Shops at Wiregrass in Tampa, FL;
  • The Mall at Robinson in Pittsburgh, PA;
  • Antelope Valley Mall in Palmdale, CA; and
  • South Bay Galleria in Redondo Beach, CA.

    The first six malls represent $1.24 billion of value, approximately $667.5 million at Forest City's share.

    Forest City provided the buyer $150 million of seller financing for a period of up to 18 months from closing. Net proceeds for the first six malls, after transaction costs and seller financing, will be approximately $180 million.

    QIC has an option over the following four malls in the second tranche:
  • Victoria Gardens in Rancho Cucamonga, CA;
  • Galleria at Sunset in Henderson, NV;
  • Promenade Temecula in Temecula, CA; and
  • Short Pump Town Center in Richmond, VA.

    The remaining four malls represent $1.93 billion of value, approximately $887 million at Forest City's share.

    "We are very pleased to achieve this key milestone with our partner," said David J. LaRue, Forest City president and CEO. "This transaction is a win-win for all parties, as we continue to focus our business on urban residential, office and mixed-use assets, and QIC acquires full ownership of a U.S. retail presence with high-quality regional malls in strong markets.

    As part of the transaction, Forest City is also transferring its retail operating platform, including most personnel, to QIC. To date, functions including leasing, marketing, tenant coordination, legal and human resources have transitioned to QIC. Accounting, property management and remaining functions will transfer to QIC as additional closings are achieved.

    With the anticipated dispositions of the regional malls to QIC and the company's New York specialty retail centers to Madison International, Forest City will have exited from substantially all of the shopping center-based retail in its portfolio.

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