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March 30, 2011

Ratner Sells Shopping-Center Stake

The Wall Street Journal
by Eliot Brown

Since more traditional means of raising money didn't work out, Forest City Ratner has turned to an asset sale.

Forest City Ratner, one of New York's largest developers, has sold a 49% stake in 15 shopping centers scattered throughout the metropolitan area in a deal that values the retail portfolio at $852 million, the company said Tuesday.

The sale to Madison International Realty comes as Forest City has been hobbled by major development projects that were started at the market's peak, when prices and expectations were far higher than they are today.

Madison, a firm that owns noncontrolling equity stakes in properties, is paying $172 million to Forest City, which holds the remaining equity and will still manage the properties. The portfolio has $500 million in debt connected with it.

The malls tend to be well-trafficked properties, with a list that includes the Atlantic Center at the edge of Fort Greene in Brooklyn, a property in the Times Square area and a mall on 125th Street in Harlem.

"This is probably the largest portfolio of retail properties owned by a single landlord in the New York area," Ronald Dickerman, Madison's president, said in an interview Tuesday.
...

The Brooklyn-based Forest City Ratner subsidiary, led by Bruce Ratner, is in the process of developing three major projects, including a new Nets basketball arena and housing complex in Brooklyn, a 76-story apartment tower in Lower Manhattan and a large mall in Yonkers.

The Brooklyn arena has seen costs rise by hundreds of millions of dollars since it was initially planned, and the company is having difficulty starting the housing component. The mall in Yonkers envisioned a high-end retail tenant base that has proved difficult to attract because of the economic downturn.

article

NoLandGrab: No word as to whether the "colorful characters" (aka shoplifters, pickpockets and purse-snatchers) who frequent the Atlantic Center and Atlantic Terminal malls were included in the deal.

Related coverage...

Atlantic Yards Report, Seeking cash, Forest City Ratner sells 49 percent of Atlantic Terminal/Center malls, other retail and entertainment properties

In an effort to "create liquidity" (aka raise cash), Forest City Ratner has sold a a 49% stake in "15 mature retail and entertainment properties" in the New York City area, including the Atlantic Terminal and Atlantic Center malls in Brooklyn.

The buyer, Madison International Realty, will invest $172.3 million in cash. The properties are valued by this transaction at $851.5 million, including $499.9 million of debt. Forest City will continue to own a majority 51% stake, and manage the properties.

Is that a good deal for Forest City? Did Madison get a bargain? The only context I see is from the Wall Street Journal, in a short article today headlined Ratner Sells Shopping-Center Stake:

The sale to Madison International Realty comes as Forest City has been hobbled by major development projects that were started at the market's peak, when prices and expectations were far higher than they are today.

Those "major" projects include Atlantic Yards, the Ridge Hill project in Yonkers, and the Beekman Tower in Lower Manhattan.

Forest City Enterprises Press Release, Forest City Announces Joint Ventures with Madison International Realty for 15 New York City Area Retail Centers

The properties included in the transaction are: the 42nd Street Retail and Entertainment Complex and Harlem Center (retail component) in Manhattan; Atlantic Center, Atlantic Terminal (retail component) and The Heights in Brooklyn; Queens Place, Steinway Street Theatres and Shops at Northern Boulevard in Queens; Shops at Bruckner Boulevard, Castle Center and Shops at Gun Hill Road in the Bronx; Shops at Richmond Avenue and Forest Avenue Cinemas on Staten Island; and Columbia Park in North Bergen, New Jersey.

Posted by eric at March 30, 2011 12:09 PM