Opened in 1989, the mall is anchored by JC Penney (64,187 sf), Sears (75,218 sf), Proffitt's (64,187 sf) and Wal-Mart (210,000 sf). Another 53,471-sf anchor space is vacant. The mall includes another 236,671 sf of freestanding buildings and 226,869 sf of small shop space. In explaining the sale, Crown American described the property as "an under performing property that continues to deteriorate."

The purchase price was satisfied by Paquerilla's company and its subsidiary reducing its stake in Crown American Realty's operating partnership Crown American Properties LP by 1,159,794 common partnership units.

In connection with the approved sale, Crown American will pay off the approximate current $13.4 million mortgage loan balance on Oak Ridge and will also assign to Crown Investments the ongoing existing agreement of sale with a third party. If ultimately sold to the third party, Crown American Realty will receive 90% of any net proceeds that exceed Crown Investments' total investment in Oak Ridge.

The sale of Oak Ridge will result in a loss on sale for financial reporting purposes of approximately $13.7 million which will be recorded by Crown American in the first quarter of 2003. The sale releases Crown Investments from related Support Agreement payments to Crown American Realty related to Oak Ridge.

An amendment to the Limited Partnership agreement between Crown American and Crown Investments will provide for a special allocation of 100% of the net tax loss from the sale of Oak Ridge to Crown Investments to the extent of Crown Investments' obligation under the Support Agreement related to Oak Ridge; the remaining tax loss from the sale will be allocated to the partners in accordance with their ownership interests. It is expected that the tax loss should result in a significant portion of the Company's common dividends that may be paid in 2003 being treated as non-taxable return of capital.

The upshot is Crown Investments' percentage ownership interest in the Operating Partnership will be reduced by an amount equivalent to 2,600,000 common partnership units. The reduction in its ownership interest has a value of approximately $25.6 million, based on the recent closing price of Crown American Realty's common shares.

Crown American Realty's 32,071,965 outstanding common partnership units as of March 28 will remain unchanged as a result of the above transactions, but the company's interest in the Operating Partnership has increased from 76.31% to 83.81%, while Crown Investments' interest decreased from 19.44% to 14.55% and the interest of Crown Investments' subsidiary Crown American Investment Company decreased from 4.25% to 1.64%.

Crown American Realty says the disposition of this property results in: "modest increases in future net income per share and net cash flows; ongoing financial and other benefits resulting from improving the quality of Crown American's overall property portfolio by disposing of Oak Ridge, an under performing property that continues to deteriorate; certainty of closing as compared to the prior efforts to sell Oak Ridge to the third party; better positioning Crown American with respect to its ongoing evaluation of strategic alternatives; and permitting management to devote time and resources to properties with more growth potential than Oak Ridge."

Instant Insights /

Crown American Sells 931,000-SF Mall to its CEO for $11.4M

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