First Union Real Estate Has Buyer for Arkansas Mall

LITTLE ROCK, AR-First Union Real Estate Equity and Mortgage Investments, a Boston-based publicly traded REIT, has entered an agreement to sell its Park Plaza Mall property here for $77.5 million, including $41.5 million of existing debt. The mall includes 262,000 sf of lettable space and is shadow anchored by a 284,000-sf Dillard’s Department store.The property was built in 1988 and was 82% leased at the end of 2003. First Union acquired the mall in 1997 for a total cost of $65.8 million. The company handed the disposition assignment to Eastdil Realty in March of this year. The sale is scheduled to close sometime before the end of the third quarter.The leases of tenants representing about 33% of the mall’s annual rental income expire in 2004 and 2005. The average effective rental rate is $31.52 per sf per year. The property’s 2004 annualized base rental income is $6.7 million. The only tenant leasing more than 10% of the property is Gap Inc., which leases 31,374 sf. That lease expires April 30, 2005. Gap’s annual rent is $801,292.The would-be buyer, described only as an unaffiliated third party, would have to assume $41.5 million in debt that matures in 2030. The current interest rate on the loan is 8.69%. On May 1, 2010, the interest rate increases to 10.69% if the loan is then a part of a securitized pool of loans in which rated securities have been issued and 12.69% if it is not. Prepayment of the loan is permitted prior to the anticipated repayment date, only with yield maintenance or defeasance.First Union has only two properties to its name, and Park Plaza Mall is by far the largest and most valuable. The company’s other asset is a 110,000-sf office property known as Circle Tower and located in Indianapolis. The building was built in 1930 and acquired by First Union in 1974 for $6.1 million. It is 89% leased.Earlier this month, First Union’s $19.25 per share takeover bid for publicly traded Atlantic Realty Trust was rejected. Denver-based Atlantic says it instead will solicit offers for its only real estate asset, the 359,000-sf Hylan Shopping Center in Staten Island, New York. First Union is 32.2% owned by FUR Investors LLC, an entity controlled by real estate investor Michael L. Ashner that acquired its stake last fall. At close of trading Wednesday, the company’s share price stood at $2.96, up $0.15 on the day. The stock’s 52-week range is $1.70-$3.80.