Aussies fling $330M at Forest City Ratner

A deal to recapitalize of portfolio of regional shopping malls is likely to free up cash that will flow into Forest City Ratner’s pipeline of projects in New York.
Forest City Enterprises, Inc., and QIC, one of the largest institutional investment managers in Australia, announced on Tuesday the signing of an agreement to form joint ventures to recapitalize and invest in a portfolio of eight of Forest City’s American retail malls.
The transaction values the eight properties at a total of $2.05 billion, representing a cap rate of approximately 5.75 percent on forecasted 2013 net operating income. Sales at the eight malls currently average approximately $500 per square foot, on a rolling 12-month basis.
Under the agreement, Forest City will contribute its current ownership interest in each of the properties to the joint venture and QIC will acquire 49 percent of those interests for cash.
Ownership of the individual properties, at closing, will vary based on existing partnerships currently in place at three of the malls.
Forest City will be the managing member of the individual joint ventures and will continue to be responsible for leasing, operations, marketing, financing, development services and asset management of the properties.
Forest City expects to raise cash liquidity of approximately $330 million, after transaction costs.
The company said it initially plans to use a majority of the liquidity from the transaction to reduce debt, but also expects to use a portion of the liquidity to fund the expansion and reinvestment initiatives in some of the malls, as well as invest in the balance of its mature real estate portfolio and new development opportunities in its core markets.
David J. LaRue, Forest City president and chief executive officer, commented, “This is another example of our strategy of securing strategic capital partners to invest with us in both existing assets and new opportunities.
“The transaction clearly demonstrates the tremendous value of these properties. Unlocking a portion of that value allows us to advance our deleveraging efforts while also reinvesting in our portfolio and new development.”
Managing Director of QIC Global Real Estate, Steven Leigh, said the firm’s expansion into the United States retail sector is a natural progression for the business following extensive investigation of the real estate market.
“The joint venture with Forest City Enterprises for investment in a portfolio of eight, high-quality retail assets represents a significant opportunity for QIC to further expand into the United States with a successful retail operator and is part of our long-term investment strategy,” said Leigh.
“QIC has more than 20 years of experience in investing, managing and adding value to prime retail assets in Australia and internationally. In this time we have established a blue-chip portfolio of investments comprising large-scale shopping centres and CBD office buildings. We now look forward to working with Forest City to implement our successful investment and management strategies in the United States.”
Preliminary priorities for the joint venture will be renovation and/or expansion of four malls: Galleria at Sunset in Henderson, Nevada, Antelope Valley Mall in Palmdale, California, Short Pump Town Center in Richmond, Virginia, and South Bay Galleria in Redondo Beach, California.
The other properties included are Victoria Gardens in Rancho Cucamonga, California, Charleston Town Center in Charleston, West Virginia, Mall at Robinson near Pittsburgh, Pennsylvania, and Promenade in Temecula, California.