Vornado sells two N.Y. malls to Calif. operator in $1.26 billion deal

October 22. 2012 12:28PM

Paramus-based real estate investment trust Vornado Realty Trust and its partial affiliate today agreed to sell New York two malls to Santa Monica, Calif.-based shopping center operator Macerich Co. for a total of $1.26 billion as part of an effort to reduce its mall business.

A Vornado affiliate expects to complete the $751 million sale of Kings Plaza Mall, in Brooklyn, N.Y., by March 2013. (Wikipedia)

Vornado affiliate Alexander's Inc. expects to complete the $751 million sale of Kings Plaza Mall, in Brooklyn, N.Y., by March 2013. Pending the closing of that sale, Vornado plans to sell the 1.8 million-square-foot Green Acres Mall, in Valley Stream, N.Y., to Macerich for $500 million. After repaying existing loans on the properties and covering closing costs, Vornado and Alexander's anticipate combined net proceeds of $666 million, and financial statement gains of $797 million, from the sales.

The transactions abide by a strategy outlined by Vornado Chairman Steven Roth in the firm's 2011 annual filing to "reduce our exposure to the enclosed mall business," with the exception of the company's plans to redevelop Springfield Mall, in Springfield, Va.

"We certainly have the expertise to lease, manage and develop mall product, but with only a handful of malls, we are in no-man's land," Roth said in the filing.

Following the completion of the sales, Vornado will own three regional malls in the metropolitan area, including Monmouth Mall, in Eatontown; Bergen Town Center, in Paramus; and Broadway Mall, in Hicksville, N.Y. But Alexander's is looking to grow its mall portfolio in the area, as the company indicated in a 2011 filing its plans to develop a mall in Queens, N.Y., adjacent to its two existing shopping centers.

For Macerich, the acquisitions are "consistent with our investment strategy of acquiring assets in the major markets where we have our best assets, and selling noncore assets and recycling capital," said Arthur Coppola, its chairman and CEO, in a statement.

Both Kings Plaza and Green Acres are anchored by Macy's and Sears, and include tenants like Aeropostale, American Eagle, Forever 21 and H&M. According to Vornado's filing, Kings Plaza is approximately 96 percent occupied, while Green Acres is 90 percent occupied.