By Adriana Pop
Philadelphia–PREIT has closed on the disposition of two retail assets in downtown Philadelphia. One of the buildings is located at 1501-05 Walnut St., and hosts an AT&T Mobility flagship store and Club Monaco, while the other property at 1520-22 Chestnut St., is available for lease.
The buyer is PH Retail, an affiliate of Post Brothers. The firm paid $45 million to acquire a controlling interest in the two Center City properties, adding 70,000 square feet of prime commercial space to its portfolio, which currently consists of assets valued at approximately $100 million. PH Retail also plans to invest more than $5 million to upgrade the buildings.
“In recent years, we’ve witnessed an increasing number of retailers gravitate toward opening up locations on high streets,” stated Randy Hope, co-founder & managing director of PH Retail. “With Millennials and Baby Boomers moving into urban neighborhoods at an unprecedented pace, retailers are migrating to heavily trafficked city streets, where restaurants, cultural attractions and entertainment venues attract both affluent residents and tourists.”
PH Retail is an opportunistic investor that identifies properties with value-add potential and optimizes their performance through capital improvements and innovative leasing strategies.
“These blocks of Walnut and Chestnut have some of the fastest-rising retail rents in the country, and we believe those numbers will continue to climb as demand for space outpaces supply,” Hope added. “As an increasing number of retailers eschew malls in favor of walkable, downtown locales, we are well positioned to acquire properties in Center City that are underutilized or not properly managed.”
PREIT announced that the transaction represents a gain on sale of approximately $20 million and a blended cap rate of 3.9 percent for the two properties the company acquired in 2014.
The sale is in line with PREIT’s strategy of strengthening its balance sheet by reducing debt through the disposition of non-core assets. James Galbally of JLL represented the company in the transaction.
“This transaction illustrates our acute knowledge of the Philadelphia market and our capital allocation approach,” Joseph Coradino, CEO of PREIT, said in prepared remarks. “We are pleased to have recognized an opportunity to add value to these properties and use the sale proceeds to reduce debt and continue our balance sheet improvement efforts.”
Based in Philadelphia, PREIT is a publicly traded REIT specializing in the ownership and management of differentiated shopping malls. The firm owns and operates approximately 26 million square feet of retail space in the eastern half of the United States. Most of the properties are located in the Mid-Atlantic region’s top MSAs.
Since 2012, the company has seen a transformation guided by an emphasis on balance sheet strength, high-quality merchandising and disciplined capital expenditures. As part of its portfolio repositioning effort, PREIT recently sold four additional non-core assets for a combined $92.4 million.
The company currently has a dominant presence in metro Philly, where it owns about 41 percent of the enclosed mall GLA, the Seeking Alpha reported. PREIT also owns four out of 19 enclosed malls in the Washington, D.C. Metro Area.
Image courtesy of PH Retail