|
Feldman Mall Properties Inc. (NYSE:FMP) has paid $93.1 million for Stratford Square Mall, a 1.3 million-square-foot shopping center in Bloomingdale, Ill.
The property would be the fourth owned by Feldman, a Phoenix REIT formed by developer Larry Feldman that went public just last month, raising just over $135 million. The company already owns interests in Harrisburg Mall in Harrisburg, Pa., Foothills Mall in Tucson, Ariz., and is close to sewing up the purchase of the Colonie Center in suburban Albany, N.Y., for $84.2 million.
Like its other holdings, Stratford Square is in need of a make-over. According to Larry Feldman, the property's non-anchor space, which is less than 70 percent leased, generates "lackluster shop sales." In 2003, inline stores generated $275/sf, an amount he said was "mediocre," especially given the property's location in fast-growing DuPage county, northwest of Chicago. But right off the bat, the property is projected to generate an 8 percent yield.
Overall, the property is 90.4 percent occupied, and has six anchors that own the spaces they occupy. Those anchors are: Kohl's, Sears, Carson Pirie Scott, Marshall Field's, JCPenney and Burlington Coat Factory.
The mall also has a four-screen movie theater, which Feldman plans to expand into a 12-18-screen multi-plex with stadium seating. The REIT will also add a junior anchor or two, increase the amount of space dedicated to restaurants and add outdoor cafes.
Feldman is funding its latest purchase with proceeds from its initial public offering as well as a $75 million floating-rate mortgage. The loan, from an undisclosed lender, has a term of three years, but could be extended for an additional two years. It pays a rate pegged to Libor plus 125 basis points. The company plans to fix its rate by entering into a swap arrangement.
It plans to invest $20 million renovating the property, which would bring the loan's leverage ratio to 65 percent.
Feldman would not identify the seller of the property, but it is believed to have been a partnership led by Ohio State Teachers Retirement System, which was pining for a year-end sale.
Feldman's strategy is to buy enclosed shopping centers in primary markets that are in need of redevelopment. "We're looking at other properties, underperforming or distressed enclosed malls, usually in strong locations that we can upgrade, renovate and turn around," Feldman said.
The company says more than half of the 1,130 malls in the United States fall into the class-B or C categories, making them ripe acquisition targets.
Although Feldman plans to continue purchasing properties – it will have roughly $130 million of equity after the Stratford Square and Colonie Center purchases – it plans to be a regular seller of properties that it turns around. Since REITs are generally restricted from quickly selling properties they buy, Feldman could recapitalize its holdings by selling joint venture interests in them.
|
