PHILADELPHIA, March 3, 2014 /PRNewswire/ -- PREIT (NYSE: PEI) today announced that it has entered into an agreement with Vornado Realty Trust (NYSE: VNO) to acquire Springfield Town Center in Springfield, VA.
Key terms of the transaction:
- Total consideration is $465 million.
- The transaction is expected to be funded using $125 million in PREIT Common and Preferred Operating Partnership Units with the balance expected to be paid in cash, including paying off debt to affiliates of Vornado, to be assumed at closing. Under certain circumstances, additional Units could be payable in lieu of cash.
- As a result of this transaction, Vornado will be a passive investor in PREIT and will be subject to an equity ownership limit of 9.9% and a standstill agreement.
- Vornado will complete the ongoing renovation of Springfield Town Center's non-anchor space.
- PREIT and Vornado will jointly lease the property, effective immediately, and through closing.
- Closing will occur two weeks following completion of the redevelopment and the achievement of 75% occupancy of non-anchor space and the opening of Dick's Sporting Goods and Regal Cinema or March 31, 2015, whichever is earlier.
- Vornado will be entitled to additional consideration equal to 50% of the value over the initial consideration calculated three years after closing, when the project is expected to be stabilized, utilizing a 5.5% capitalization rate.
- PREIT also becomes entitled to develop land surrounding the mall in accordance with existing zoning, which permits the construction of an additional 3 million square feet of retail, residential, office and hotel space.
The 1.35 million square foot mall, comprised of 642,000 square feet of anchor space and 703,000 square feet of non-anchor space, is currently undergoing redevelopment with a grand re-opening scheduled for October 17, 2014. The non-anchor space at the property is currently 30% leased, including the following notable retailers: Michael Kors, H&M, Chico's, Pandora, Francesca's Collection, Maggiano's Little Italy, Yard House Restaurant, Wood Ranch BBQ, LA Fitness, Regal Cinema, Dick's Sporting Goods and the Mid-Atlantic region's only Topshop. Additionally, over 175,000 square feet of leases are currently being negotiated. The mall is anchored by Macy's, Target and JCPenney, all of whom remain operational while the mall is closed for construction.
Springfield, VA is located in Fairfax County, one of the wealthiest and highest income counties in the U.S. The mall is located at the intersection of I-95, I-395 and the Capital Beltway with average daily traffic exceeding 500,000 cars. The property will join PREIT's Premier malls group, strengthen the Company's presence in the Mid-Atlantic region and provide greater access to the dynamic, strong and growing Washington D.C. metro market.When commenting on the transaction, Joseph Coradino, CEO of PREIT said, "This off-market transaction is transformative for PREIT in our evolution into a quality mall owner with a strong presence in major markets. The opportunity to acquire a property of this caliber is rare and, in light of having achieved balance sheet and operational stability and divested several of our lower quality malls, we are well positioned to leverage PREIT's value creation capabilities to realize this asset's potential." BofA Merrill Lynch and Wachtell, Lipton, Rosen & Katz acted in advisory roles to PREIT on this transaction.