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Lightstone Acquires Interests in 20 Outlet Centers in $456M Deal
July 2, 2008
By: Barbra Murray,
Contributing Editor
Lightstone Value Plus REIT will soon have a stake in 20 factory
outlet centers, now that it has signed on purchase from 22.54 to
25 percent interests in the properties from affiliates of Arbor
Mortgage REIT.
The transaction, which involves assets with an aggregate 7.3
million square feet of space, is valued at $456 million.
Lightstone REIT will acquire 25 percent of Arbor's Prime Outlets
Acquisition Co., which owns 18 factory outlet centers in 15 states
including: California, Florida, Georgia, Illinois, Maryland,
Massachusetts, Michigan, Mississippi, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia and Wisconsin. The
transaction also includes the REIT's purchase of a 22.54 percent
membership interest in Mill Run L.L.C., which owns two shopping
centers in Orlando, Fla. The properties, which operate under the
management of Prime Outlets, have an average occupancy level of
93.4 percent. The portfolio's low vacancy rate is a strong
indication that the outlet shopping center niche is faring well in
an economy that has left most other retail property types in less
favorable positions. The average national vacancy rate is expected
to reach 11.1 percent this year, an increase of 140 basis points
from 2007, according to a midyear report by Marcus & Millichap
Real Estate Investment Services.
Lightstone REIT will fork over $91.2 million in cash and shares of
its operating partnership for interests in the outlet centers and
closing costs, and the company will assume a pro rata share of
existing mortgage debt totaling approximately $364.8 million, as
well. Additionally, terms of the deal give Lightsome REIT rights
to four new development projects--located in the Atlanta, Dallas,
San Francisco and St. Petersburg, Fla., areas--that will deliver
in 2010 and 2012 with a total of 1.4 million square feet; the
suburban St. Petersburg property, located in Ellenton, is an
expansion project.
The Arbor transaction constitutes a major move for Lightstone,
which was formed in 2004. The industry's first no front-end load
REIT, Lightstone REIT made its inaugural purchase in 2006, paying
$26 million for the 256,000-square-foot Belz Outlets in St.
Augustine, Fla. Other transactions include the November 2007
acquisition of a five-property apartment portfolio totaling 1,576
units in Florida and North Carolina from Camden Property Trust.
Based in Lakewood, N.J., Lightstone REIT invests in a variety of
commercial real estate with a primary focus on capital
appreciation, with income being a second priority. The REIT is
presently offering common stock at $10 per share.
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