The purchase was funded with a $24-million, three-year bank loan that bears interest at a rate of LIBOR plus 200 basis points, and approximately $5 million of borrowings on the Glimcher's line of credit. Glimcher says it also may borrow up to an additional $12 million during the life of the loan for the addition of said new anchor and other improvements to the mall.
The purchase price represents a 15% cap rate based on estimated in-place net operating income. After the Kauffmann's addition, the lease up of the additional small shop GLA and various capital improvements to the existing mall, Glimcher expects stabilized returns in the 12% to 13% range.
Eastland Mall, built in 1968, has undergone several renovations and expansions, the most recent of which was in 1998. The new department store is expected to open in the fall of 2005, giving the mall four department store anchors; the others are Lazarus-Macy's, Sears and JCPenney.
Company president Michael Glimcher says the mall is an "excellent fit" in the company's mall portfolio because it is a large center in a growing middle market metropolitan area that can remain the dominant mall in its trade area. Because of what he describes as "a very opportunistic price," Glimcher adds that the addition of a key anchor tenant also provides a near-term growth opportunity.
Glimcher Realty Trust owns, manages and develops enclosed regional and super-regional malls and community centers. The company has been shedding non-core community centers and utilizing the proceeds to reduce debt and increase its investment in regional mall properties. As of December, Glimcher's regional mall portfolio consisted of 20.9 million sf of gross leasable area in 24 regional malls. Its community center portfolio includes 45 properties and 5.2 million sf of GLA.
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