1M-SF Puerto Rico Mall Sells for $309M

SAN JUAN-The California Public Employees’ Retirement System and the State of Michigan Treasury has sold a 1.1-million-sf mall near here to Simon Property Group for $309 million. CalPERS and Michigan each owned a 50% stake in the asset, which is located in Carolina, southwest of San Juan.Attracting 30,000 visitors a day, the 26-year-old Plaza Carolina generates total annual sales of approximately $275 million, which translates to more than $450 per sf. The center has maintained a 98% average historical occupancy rate over the last five years. Anchors include JCPenney, Sears, a supermarket and a 12-screen movie theater.Credit Suisse First Boston principled the private placement of a five-year, $260-million acquisition loan for Simon, an Indianapolis-based mall REIT with interests in 240 properties in North America and 48 in Europe. The financing is comprised of a fixed and floating component at an initial approximate all-in blended rate of 3.1%. CalPERS and Michigan also recently sold their combined interests in the 655,000-sf Bangor Mall in Bangor, ME (50% interest) and the 1.1-million-sf Montgomery Mall in Montgomeryville, PA (57.31% interest) to the holders of the remaining interests, which includes Simon. Simon paid $67 million to increase its interest in Bangor Mall to 67.6% from 32.6% and its interest in Montgomeryville Mall to 54.4% from 23.1%. Montgomery Mall generates sales of approximately $360 per sf. It was 92% leased at the start of the year. Bangor Mall, the only mall in Bangor, generates sales of approximately $370 per square foot and was 91% leased at the start of the year. The purchase price for the two mall interests was partially funded by the proceeds of a mortgage refinancing for Montgomery Mall. The existing 7.48%, $27-million mortgage loan maturing on Aug. 10, 2006 was replaced by a $96-million, 10-year mortgage at a rate of 5.17%. Simon contemplated all three acquisitions in its 2004 guidance given in February. The assets are expected to deliver a combined initial 12-month unlevered yield of 8%.