CBL Spends $231M on Pennsylvania Retail

MONROEVILLE, PA-At a cost of $231.2 million, CBL & Associates Properties of Chattanooga, TN, is the new owner of 1.4 million sf of retail in this eastern Pittsburgh suburb. The seller was South Florida-based Turnberry Associates.The leasehold purchase includes the 1,128,747-sf Monroeville Mall, which is currently 93% occupied with 12-month average mall shop sales of $365 per sf; the 229,588-sf Annex, which is 100% occupied, and; the 86,204-sf Village, which is currently under construction and 50% leased. JCPenney, Kaufmann’s and Lazarus anchor the mall. The Annex is anchored by Best Buy, Burlington Coat Factory, Dick’s Sporting Goods and OfficeMax. The Village will feature a Barnes & Noble bookstore.The purchase price includes the assumption of a $134-million fixed-rate, non-recourse loan that matures in 2013 and bears interest at a rate of 5.7%; about $36.2 million in cash, including closing costs; and the issuance of 780,470 special common units of CBL’s Operating Partnership with a par value of $60.95 million, or $78.10 per unit. The SCUs will be entitled to receive an initial annual dividend of 6.5% and will be exchangeable on a one-for-one basis for shares of CBL’s common stock. CBL also obtained an option to purchase the fee interest in the property. The option can be exercised anytime after three years for $10 million and can be paid either in cash or SCUs at the election of CBL.The investment in the mall and the associated center is expected to generate an initial yield of 7.37% based upon current income, according to CBL. An additional $20.7 million will be invested for the open-air expansion, which is expected to yield 8.18% when it opens in mid-2005. The combined return for the entire project is expected to be 7.45%, according to CBL.Built in 1969, Monroeville Mall has been expanded and renovated numerous times, the most recent of which was completed in 2003 with a $10 million investment to upgrade the mall decor and install new air chillers. The two-story complex is located on about 169 acres on the south side of William Penn Highway, one-half mile south of I-376 and two miles west of the Pennsylvania Turnpike (I-76).CBL, which touts itself as “one of the top five owners of shopping centers in North America,” also owns the Westmoreland Mall located approximately 45 minutes east of Monroeville.