PREIT trims four shopping malls from portfolio, in two sales worth $92.4M
Pennsylvania Real Estate Investment Trust has sold four malls in Alabama, Virginia, and Pennsylvania, almost completing its years-long strategy of shearing lesser-performing shopping centers from its core focus on assets in populous, heavily shopped areas.
Pennsylvania Real Estate Investment Trust has sold four malls in Alabama, Virginia, and Pennsylvania, almost completing its years-long strategy of shearing lesser-performing shopping centers from its core focus on assets in populous, heavily shopped areas.
Philadelphia-based PREIT sold the centers to two buyers for $92.4 million, bringing its total mall sales to 13 in about three years, according to a statement being released Wednesday. Just one property, Washington Town Center near Pittsburgh, remains on the market.
The sales come as PREIT, owner of the Cherry Hill and Willow Grove Park Malls among others locally and a partner in the $325 million redevelopment of Center City's Gallery at Market East, seeks to concentrate on holdings best able to turn consistent profits and weather economic downturns.
"There's a higher level of risk among lower-quality assets," chief executive officer Joseph Coradino said before the statement's release. "We really de-risked our company."
The recent sales include Lycoming Mall near Williamsport, Pa., which went to New York-based Kohan Retail Investment Group for $26.35 million, according to PREIT.
Also involved are three malls - Gadsden Mall in Gadsden, Ala.; Wiregrass Commons Mall in Dothan, Ala.; and New River Valley Mall in Christiansburg, Va. - that sold to Farallon Capital Management L.L.C. of San Francisco for $66 million.
The package had earlier been under contract for $95.4 million, but setbacks including the bankruptcy filing of Hancock Fabrics, a tenant at Wiregrass Commons, forced the company to renegotiate, Coradino said.
Such setbacks underline the risk of retaining malls with low sales numbers in less populous parts of the country, which tend to rely on a less-stable tenant mix, he said. Also, big retailers often close branches first in such locations, to cut costs.
"Our hypothesis, if you will, was proved correct," Coradino said.
Since PREIT announced the sell-off plan in November 2012, its mall sales have earned it more than $600 million, which has been reinvested in other properties and used to pay down debt, the company said.
Without the lesser performers weighing it down, PREIT's sales value per square foot - a key measure of mall-operator success - has also been on an upswing, rising from $372 during the last three months of 2012 to $432 during the same period last year. The most recent round of sell-offs will lift the sales value per square foot to $458, it said.
To compare, Indianapolis-based Simon Property Group, owner of King of Prussia Mall, reported sales value per square foot of $620 during the last three months of 2015. Santa Monica, Calif.-based Macerich, PREIT's partner in the Gallery's rehabilitation, reported sales value per square foot of $635.
Coradino said the Gallery project and improvements to Springfield Town Center in Fairfax County, Va., are expected to elevate PREIT's sales value beyond $500 a square foot, a level that would earn it more clout with retail tenants and investors.
Meanwhile, the company awaits word from the state on whether it will receive $30 million in redevelopment aid that it needs to fully realize its vision for the Gallery project, Coradino said.
Pennsylvania's long-running budget stalemate - which had been holding up funds from the Redevelopment Assistance Capital Program - came to an apparent end this week when Gov. Wolf declined to veto a $6 billion appropriation bill approved by the House and Senate.
Wolf spokesman Jeff Sheridan wrote in an email Tuesday that no decisions had been made on grants from the program.
The passage of the budget is "definitely a step in the right direction" toward clarifying PREIT's final plans for the Gallery, Coradino said. "But we're not quite there yet."
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