Pennsylvania Real Estate Investment Trust has amended and extended its 2010 credit facility with its bank group, led by Wells Fargo Bank, and refinanced the mortgage loans on two power center properties.
The amendment increases the revolving portion of the facility by $100 million, reduces the current applicable interest rate by 90 basis points, extends the term of the facility by one year to March 10, 2014 and eliminates the mandatory facility pay-down requirements from capital events, among other changes. The amendment also modifies some of the financial covenants under the facility, reducing the maximum permitted leverage and increasing the minimum corporate debt yield.
Specifically, the revolving portion of the facility is now $250 million. As of June 30, 2011, the outstanding balance of the revolving portion of the facility was $70 million. The amount outstanding under the term loan portion of the facility has been reduced by $100 million to $240 million.
The interest rate range under the Facility was lowered to between 2.75 percent and 4.00 percent per annum over LIBOR, depending on the Company’s leverage. Previously, the interest rate range was between 4.00 percent and 4.90 percent per annum over LIBOR. Initially, the new rate in effect is 4.00 percent per annum over LIBOR.
Modifications to the financial covenants under the Facility reduce the maximum permitted leverage ratio to 70 percent from 75 percent, and require the corporate debt yield, as defined, to be at least 9.50 percent until March 30, 2012, then at least 9.75 percent for the next year, and at least 10.00 percent after March 31, 2013. The maximum amount that may be borrowed under the facility now is subject to a minimum debt yield of 9.75 percent based on the net operating income of the collateral properties.
The range of interest rates may be further reduced at the option of the company to between 2.00 percent and 3.00 percent per annum over LIBOR, and the company will have an option to extend the maturity date of the facility by one year to March 10, 2015, under specified conditions and subject to certain amendments to the financial covenants set forth in the facility.
The company also announced the refinancing of the mortgage loans on Red Rose Commons, in Lancaster, Pa., and The Court at Oxford Valley, in Langhorne, Pa., two power center properties in which it holds 50 percent partnership interests. The 10-year mortgage loans are non-recourse with an average fixed rate of 5.42 percent. The total proceeds from both loans were approximately $90 million, of which PREIT’s share was approximately $45 million. The partnerships used a portion of the proceeds to repay previous mortgage loans on these properties of approximately $56 million that carried an average interest rate of 7.16 percent.
Howard Hughes Corp. Acquires Morgan Stanley’s Interest in Woodlands
The Howard Hughes Corp. entered into a definitive agreement to acquire from Morgan Stanley Real Estate Investing its 57.5 percent legal interest, which equates to a 47.5 percent economic interest based on the parties' financial arrangement, in The Woodlands Master Planned Community located in Houston for $117.5 million.
The purchase consideration consists of $20 million in cash payable at closing and a $97.5 million non-interest bearing promissory note due December 1, 2011. The acquisition has been approved by Howard Hughes’ Board of Directors and is subject to customary closing conditions and was anticipated to close on July 1, 2011.
Upon completion of the purchase, The Woodlands will become a wholly owned subsidiary of The Howard Hughes Corp.
The Woodlands includes over 28,000 acres with over 97,000 residents and 1,700 employers. At March 31, 2011 The Woodlands had approximately 1,372 acres of unsold residential land, representing approximately 4,532 lots, and approximately 936 acres of unsold land for commercial use. The Woodlands also has full or partial ownership interests in commercial properties totaling approximately 434,328 square feet of office space, 203,282 square feet of retail and service space, 865 rental apartment units, and also owns and operates a 440 room conference center facility and a 36-hole country club.
The Woodlands generated $36.3 million and $120.3 million of revenues for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively.
Inland Real Estate Acquisitions Buys Draper Peaks
Inland Real Estate Acquisitions Inc. acquired Draper Peaks, a 229,796-square-foot shopping center in Draper, Utah, for approximately $41.5 million.
The center is anchored by Ross Dress for Less. The property was purchased on behalf of Inland Diversified Real Estate Trust Inc., and the transaction was facilitated by Lou Quilici, senior vice president of Inland Real Estate Acquisitions.
Construction of Draper Peaks was completed in 2007. In addition to Ross, the tenant line-up includes PETCO, Michaels and Office Depot. The property is shadow-anchored by Kohl’s, which was not purchased as part of this transaction.
M&M Brokers Sale of Mansfield Marketplace
Robert Horvath and Todd Tremblay of Marcus & Millichap Real Estate Investment Services, the nation’s largest real estate investment services firm, have successfully brokered the transaction of Mansfield Marketplace, a 23,840-square-foot shopping center in Mansfield, Mass. The sales price of $10.38 million represents $435 per square foot and a cap rate of 8.34 percent.
Mansfield Marketplace was built in 2009 and consists of eight tenants in two separate buildings. The tenants include AT&T Wireless, Chipotle, Sleepy's, Friendly's, Radio Shack, Knockout Haircuts, Pearle Vision, and the Asian Grill. The property is located directly across from the entrance of Mansfield Crossing, a 383,000-square-foot open-air center.
Robert Horvath and Todd Tremblay represented both the seller and buyer in this transaction: Hecht Development and the Davos Family Trust.
WP Realty Sells New Brite Plaza
WP Realty announced the sale of New Brite Plaza, a 156,956-square-foot grocery-anchored shopping center in New Britain, Conn.
The center was originally constructed in 1966 and underwent an extensive redevelopment in 2008, with improvements including a new façade, pylon sign and partial roof replacement. WP Realty stabilized the center by leasing 37,000 square feet of space to Ocean State Job Lot, 23,000 square feet of space to Marshalls and 16,500 square feet to Save-A-Lot. The center also features Dunkin Donuts, H&R Block, Rent-A-Center, Advance Auto, Payless Shoes, and Rainbow Shops.
WP Realty purchased the property in June 2007, with an occupancy rate of only 58 percent and had brought it to 100 percent occupancy by the time of the sale.
Boulder Group Brokers Two NNN Sales
The Boulder Group recently completed two sales of single-tenant net-leased retail properties.
In the larger deal, Boulder sold of a single tenant net leased ConocoPhillips property in Algonquin, Ill., for $5.18 million.
The 43,429-square-foot parcel was originally developed in 1995. The single tenant property is leased on a triple net basis to ConocoPhillips with 13 years remaining on the lease term.
Randy Blankstein and Jimmy Goodman of The Boulder Group represented the seller, a Chicago based partnership. The purchaser was a private high net worth investor from Atlanta.
In a separate deal, Boulder completed the sale of a single tenant net leased Pamida property located in Ely, Minn., for $2.65 million.
The 32,100-square-foot property was developed in 2008. The single tenant property is leased on a triple net basis to Pamida with 17 years remaining on the primary lease term.
Blankstein and Goodman represented both parties in the transaction. The seller was a partnership based in Minneapolis and the buyer was a 1031 exchange investor who purchased the property on an all cash basis.
Faris Lee Completes Sale of Missouri Retail Property
Faris Lee Investments completed the $7.1 million sale of a single-tenant net-leased 35,600-square-foot property occupied by 24 Hour Fitness in Lee’s Summit, Mo.
The property was built in 2007 and is situated on 3.53 acres.
Matthew Mousavi, director with Faris Lee Investments, represented the buyer, a private family trust, from Hawaii. Baum Realty out of Chicago represented the seller, CFM 291 Fitness LLC from Omaha, Neb.
The closing cap rate was 9.45 percent and will be a 10.65 cap rate in 2013 with 12 percent increases every five years thereafter, according to Mousavi. The buyer is currently working with Faris Lee’s Capital Markets Group for a potential refinance of the property.
Other Notable Deals
HighBridge Properties sold a net‐leased O’Reilly Auto Parts store in Camden, S.C., for $1.1 million. HighBridge represented the property’s developer and seller, A.L. Saad and Co. in the transaction. O’Reilly Auto Parts is operating the 6,600‐square‐foot property on a 20‐year net lease in which it is responsible for property expenses and taxes. The cap rate for the Camden transaction was 8.25 percent.