(For more retail coverage, click GlobeSt.com/RETAIL.)
PHILADELPHIA-Pennsylvania Real Estate Investment Trust has signed an agreement with Federated Department Stores Inc. to acquire floors one through six of the former Strawbridge & Clothier department store building at Eighth and Market streets. Jenkintown-based American Realty Financial Trust owns floors seven through 13, which are offices that, according to AFR, are 94% occupied, and were not a part of the transaction with PREIT.
The Strawbridge building is located next to locally based PREIT's 527,000-sf Gallery at Market East. The portion acquired by PREIT aggregates approximately 550,000 sf, Joseph Coradino, president of PREIT Services, tells GlobeSt.com. The new owner plans to utilize the lower three floors for retail and the others for office space.
"Our major objective is to use it to enhance the retail presentation at the Gallery," Coradino says. "It presents an opportunity to get some new retail anchors--the kinds of tenants that have been talked about for Philadelphia for a long time that will help us position the Gallery as a vibrant, pedestrian-friendly retail center."
He declined to identify any potential tenants, but says, "there is a lot--I mean a lot of interest. We do not lack for prospects; there are between four and six eager prospects now. It's a matter of selecting ones that fit within the transformation we envision for Market East. We now have the full stretch from Eighth to 11th Streets along Market. With the expansion of the Convention Center to the west and completion of the Constitution Center to the east, along with all the residential development taking place there, we think Market East has much unrealized potential."
Redevelopment of the Gallery and of the Strawbridge unit will be done in tandem, commencing in 2007, "although it could slip to 2008," he says. The Strawbridge building was built in 1931, "and it will take a lot of work." Of the Gallery, he says, "it's defensive. It defends itself by turning its back on the street. We want to open it to the street, with cafes and retail that will capture the customers in that area."
He declined to disclose the cost of the acquisition, and a call to Federated was not returned by deadline. Coradino also declined to disclose PREIT's planned investment in the adjacent properties or retail rent rates. "I don't have answers to these questions. The first thing we want to do is actualize our vision through architectural plans. Then comes the pro forma. We're going to define the rents for Market East."
Cincinnati-based Federated acquired Strawbridge's along with the 354,000-sf Lord & Taylor in the Wanamaker building as part of its $11-billion acquisition of the May Co. in 2005. Federated dropped the Strawbridge brand and is retaining the Wanamaker asset and converting it into a Macy's, scheduled to open next month. This is PREIT's third acquisition of Strawbridge units from Federated. This June, it acquired one in the Cherry Hill Mall in New Jersey and another at Willow Grove Park in Willow Grove. PREIT owns both of those centers, and the retailer previously owned its units within them.
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