average $650 per square foot.
NEW YORK CITY-Vornado Realty Trust and its affiliate Alexander’s Inc. said late Friday that the $751-million sale of Kings Plaza Shopping Center in Brooklyn to the Macerich Co. has closed. The sales to Macerich of Kings Plaza and another Vornado retail property, Green Acres Mall in Valley Stream, NY, were first announced in October.
As a result of the sale of the 1.2-million-square-foot Kings Plaza reaching its conclusion, Vornado shareholders of record on Dec. 10 will receive a special long-term capital gain dividend of $1 per share, payable on Dec. 21. The REIT’s share of the financial statement is about $180 million.
For Alexander’s, a 32.4% affiliate of Vornado, the financial statement gain is approximately $600 million and the tax gain is approximately $624 million. The latter amount will be paid out to shareholders in the form of a special long-term capital gain dividend of $122 per share, payable on Dec. 20. Net proceeds from the sale for Alexander’s were about $479 million after repaying the existing loan and closing costs.
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Based in Santa Monica, CA, Macerich already owns five other properties in the New York tristate region, with the others being Cross County Shopping Center in Yonkers, NY; Queens Center Mall and the Shops at Atlas Park, both in Queens; Danbury Fair in Danbury, CT; and Freehold Raceway Mall, in Freehold, NJ. When the $1.25-billion acquisitions of Kings Plaza and Green Acres were first announced, Arthur Coppola, chairman and CEO of Macerich, said the transactions were consistent with the REIT’s investment strategy of acquiring assets in major markets and repositioning them with new tenants, which it planned to do with its two new assets.
“This allows us to build on our New York portfolio and will be an excellent complement to Queens Center,” Coppola said in a statement. “At Kings Plaza and Green Acres there are substantial opportunities to replace lower sales producing tenants with higher productivity tenants, in a manner similar to what we accomplished after we acquired Queens Center.”
The largest shopping center in Brooklyn, Kings Plaza opened in 1970. Its annual sales per square foot average $650. It’s currently 95% occupied, with a lineup that includes Aeropostale, American Eagle, Armani Exchange, Forever 21, H&M, MAC, Pink, Swarovski and Victoria’s Secret.
Half again as large as Kings Plaza at 1.8 million square feet, Green Acres is right over the Nassau County border from Queens. It was originally built in 1956 and enclosed in 1968, then underwent expansion in 2007. At 94% occupancy, sales there average $520 per square foot; the $500-million sale to Macerich is expected to close in the first quarter of 2013.
When the sales of both properties made headlines in October, the Wall Street Journal reported that the combined price Macerich was paying amounted to a first-year yield roughly in the 5.5% range, compared to what Real Capital Analytics said was an average yield of 6.2% for high-end mall deals over the preceding 12 months. “A lower yield means a higher value for the property, and the yield in the Macerich deal highlights the premium the two malls fetched because of their New York locations,” according to the WSJ.