For more retail coverage, click GlobeSt.com/RETAIL.
SOMERVILLE, MA-Federal Realty Investment Trust acquired Assembly Square and an adjacent 220,000-sf retail and industrial complex from Assembly Square LP for $64 million. Last April, after more than six years, the city's Board of Alderman approved a zoning ordinance that paved the way for the redevelopment of the 26-acre site.
Assembly Square is an approximately 330,000-sf enclosed mall that is currently being redeveloped into a power center. Federal Realty expects to invest an additional $38 million to complete the redevelopment with stabilization anticipated within 12 months. The property is 100% preleased to national tenants including TJ Maxx, Bed, Bath & Beyond, Staples, Kmart, Sports Authority, AC Moore and Christmas Tree Shops. The acquisition also includes zoning entitlements to add four mixed-use buildings on 3.5 acres, which will include approximately 41,000 sf of retail space, 51,000 sf of office and 239 residential units.
The adjacent 10-acre parcel, which comprises approximately 220,000 sf of space, is currently 100% leased for a mix of quasi-retail and industrial uses. This parcel also includes an option to purchase adjacent land parcels from the Somerville Redevelopment Authority, all of which are zoned for mixed-use development.
According to Federal Realty executives, the entire project could encompass as much as 720,000 sf of retail, 1.5 million sf of office and more than 1,600 residential units on a total of 50 acres.
"Federal Realty's acquisition of Assembly Square represents a well-balanced, risk-adjusted investment," states Jeff Berkes, senior vice president and chief investment officer for Federal Realty. "Upon stabilization in early 2006, we expect to earn a 7% return on our approximately $100-million investment. We see this as a very rare opportunity."
Berkes tells GlobeSt.com that Federal Realty views Boston as a key market and is actively searching for additional acquisition possibilities. "We clearly want to grow in Boston." He says the company looks to have properties in areas where there are a lot of people with a good income. Another factor is the barriers to entry for new competition. "Federal Realty will master plan the development and bring in developers to bear the primary risk of residential and office development, while we retain control of the retail," adds Don Wood, Federal Realty's president and chief executive officer.
Federal Realty will open a full-service regional office in the Boston metropolitan market in the near future. Including Assembly Square and four Boston-area properties acquired for its own account and its joint venture in 2004, Federal Realty now manages, owns or has an interest in eight retail properties comprising 1.6 million sf in the Boston area.
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