(For more retail coverage, click GlobeSt.com/RETAIL.)
PHILADELPHIA-Cedar Shopping Centers Inc. has paid $3.5 million for a 49%-ownership in the 24-acre parcel at 11601 Roosevelt Blvd. The land contains a 430,000-sf building that is currently net leased to the Internal Revenue Service through 2010.
As GlobeSt.com previously reported, the success of electronic tax filing has prompted a restructuring of the IRS that calls for the closure of several paper processing operations nationwide. This is the largest of the properties the IRS utilizes for that function here.
According to Leo Ullman, CEO of the Port Washington, NY-based shopping center REIT, the IRS is permitted to exit with notice before its lease expires and has announced its intention to move operations within the next two to three years. In the meantime, Cedar expects to get a cash-on-cash return of more than 10% on its investment.
It is paying half cash and half company operating units for its stake in the property. The owner, which retains a 51% share, is Inrevco Associates LP, a syndicated partnership based in West Orange and Parsippany, NJ. Ullman tells GlobeSt.com that Cedar will take control of the asset when the IRS vacates. "It will be more than 50%," he says, with the exact proportion depending on how many members of the partnership wish to sell their shares. The property is encumbered with a first mortgage of nearly $16.5 million, due May 2011, which Cedar would assume.
"It's a great site for new retail in the area," Ullman says and calculates, "it will easily accommodate 250,000 sf of retail. We've already been approached by two specific interested big box tenants." Once the IRS vacates, he says the existing building will probably be demolished and estimates that entitlements and site preparation will take one to two years.
The new center would raise Cedar's total retail assets in Philadelphia to well above one million sf. Its current properties here include Academy Plaza; Port Richmond Village; Riverview Plaza I, II and III; Columbus Crossing and South Philadelphia Shopping Center, which aggregate 939,755 sf. It also owns the 123,596-sf Swede Square Shopping Center in East Norriton and a 41,000-sf L.A. Fitness unit in Fort Washington.
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