UPDATED with Cedar CEO Ullman's comments. - Ron Rubin's Pennsylvania Real Estate Investment Trust has agreed to sell five "power center" shopping areas, mostly in eastern Pennsylvania, for $134 million to Cedar Shopping Centers Inc., Port Washington NY, and its investment partner RioCan Real Estate Investment Trust, Toronto. (Among other links, RioCan chief financial officer Raghunath "Rags" Davloor serves on Cedar's board.) Sale includes:
- Creekview Shopping Center, Warrington, Bucks County (Genuardi's, Bed Bath & Beyond)
- Pitney Road Plaza, Lancaster (Best Buy)
- Monroe Marketplace, Selinsgrove (Giant Food, Kohl's, Dick's)
- Sunrise Plaza, Forked River, NJ (Home Depot, Kohl's, Staples)
- New River Valley Center, Christiansburg, Va. (Best Buy, Ross)
Also, for around $56 million more, Cedar and RioCan agreed to buy:
- Red Rose Commons, Lancaster (Home Depot, Weis; subject to approval by PREIT's co-owner)
- Whitehall Mall, Allentown (Sears, Kohl's; subject to approval by PREIT's co-owner and its banks)
The buyers expect to borrow at least half the purchase price of each center, except Whitehall, where they hope to take on the existing mortgage. PREIT will use up to $97 million of the proceeds to pay down debt.
Most of these centers were built by publicly-traded PREIT in the mid-2000s, before the property market crashed. "We did not build them with the intention to sell any of them," PREIT spokesman Shawn Southard told me. "It was an opportunistic transaction." PREIT will keep managing the properties, which are "97% leased," for three years. PREIT will keep some undeveloped plots at the sites.
Publicly-traded Cedar already owns the Shore Mall in Egg Harbor Township; the Academy Plaza, Columbus Crossing, Port Richmond Village, Riverview Plaza, Roosevelt Boulevard (soon to be vacated by the Internal Revenue Service), and South Philadelphia Shopping Center developments in Philadelphia; and the vacant Maxatawny Market Place in Kutztown; newly-built Heritage Crossing, Limerick; Swede Square, East Norriton; Aston Center; Carll's Corner (Bridgeton); Greentree Road (Sewell), and Washington Center (Washington Township, Gloucester County) in the burbs.
How'd this happen? "I've known Ron Rubin for probably 30 years," said Cedar boss Leo Ullman. They started talking about a deal six months ago. "It's an off-market transaction, at a good and fair price," Ullman told me. "We are very much committed to eastern Pennsylvania, it's almost half of our portfolio. We like the area very, very much. We like its stability, and the barriers to entry" given the relatively high cost of property and the local-government zoning complexity that makes it hard to build new stores here. Ullman added that Cedar has so far depended on supermarket-based neighborhood centers; the PREIT properties "gives us much better exposure" to big-box national chains.