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Deal of the Week

Updated Dec. 18, 10:00 AM. Correction applied to second paragraph. Original version said Faris Lee advised Mervyns

Forever 21 and Kohl’s acquired 46 former Mervyns leaseholds in a bankruptcy auction through a joint bid valued at approximately $6.3 million. Kohl’s will take 31 of the sites and Forever 21 15. The transaction is pending a final court approval, expected to be granted before the end of the month.

Most of the Mervyns locations are 80,000-square-foot, triple net leased properties, with 20-year terms and rents within 90 percent of market rate, says Rich Walter, president of Faris Lee Investments, an Irvine, Calif.-based retail brokerage firm. Faris Lee serves as a real estate advisor to Macerich on dealing with its Mervyns sites. The retailer filed for Chapter 11 bankruptcy in July.

“The value of those boxes is actually better with a Kohl’s inside than it was with a Mervyns,” says Walter. “And Forever 21 is a new tenant with that format and that size, but it appears that they are very popular. I think they are very well off financially and this is probably a good time for them.”

Of the purchased leases, 22 are on sites currently owned by the Macerich Co., including 8 at Macerich-owned malls. Macerich purchased 39 Mervyns sites in late 2007/early 2008 and expects to close on another two by the second quarter of 2009.

“The Forever 21 retailing model has got a very attractive proposition for consumers and they operate some 40,000-square-foot and 50,000-square-foot stores, so we know what they can do with large spaces,” says Tony Grossi, senior executive vice president and COO with Macerich Co., about the discount apparel chain that plans to use former Mervyns stores to expand its footprint.

Other Notable Deals

Pennsylvania Real Estate Investment Trust (PREIT) completed three non-recourse mortgage loans totaling $173 million. The loans were secured by the 1.1-million-square-foot Exton Square Mall in Exton, Pa.; the 711,000-square-foot Francis Scott Key Mall in Frederick, Md.; and the 750,000-square-foot Viewmont Mall in Scranton, Pa. The $70 million Exton Square loan featured a fixed 7.50 percent interest rate and a five-year term. The loan takes care of the company’s last remaining debt maturity for 2008; a $93 million mortgage. The proceeds from the other two loans will be used primarily to fund PREIT’s ongoing development and redevelopment programs. The $55 million Francis Scott Key loan featured a variable interest rate of LIBOR plus 2.35 percent that was swapped to a fixed 5.25 percent rate for its full five-year term. The $48 million Viewmont loan also featured a variable interest rate of LIBOR plus 2.35 percent that was swapped to a fixed 5.25 percent rate for its five-year term. As of today, PREIT faces a total of $62 million in non-extendable debt maturities in 2009… Cedar Shopping Centers Inc. announced that the extension of its $300 million secured revolving credit facility through January 2010 has become effective. The facility, which currently has approximately $42 million remaining, can be expanded to $400 million… Donahue Schriber completed a $121 million bank syndication loan and $187 million in refinancing for nine retail properties in two separate transactions. Lenders involved in the syndication transaction included Bank of America, Wells Fargo Bank, PNC Bank and US Bank. The company will use the funds for future development and acquisition opportunities in the western portion of the United States.

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