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VINELAND, NJ-Pennsylvania Real Estate Investment Trust has agreed to buy the 925,000-sf Cumberland Mall for $59.5 million, or about $64 per sf. The seller is Cumberland Mall Associates, a partnership that among others includes Ronald Rubin and George Rubin, chairman/CEO and vice chairman respectively of the Philadelphia-based PREIT.

"It's a strong mall in a growth market," says Jonathan Weller, PREIT's vice chairman. "The acquisition solidifies our position in our core geographic market."

Besides the ownership link through principals of Cumberland Mall Associates, PREIT has another existing connection to the property: PREIT-Rubin Inc. has managed and leased the property for the past seven years. Cumberland Mall is anchored by Boscov's, JCPenney and Value City. Its in-line retail space, currently 98.8% occupied, has 62 tenants including American Eagle Outfitters, Gap, Old Navy and Victoria's Secret. The in-line sales volume for the past 12 months was $328 per sf.

"With the strong tenant mix and potential for increased rent from this mall, we expect an improved return on this investment," Weller says. "We underwrote the acquisition to generate an unleveraged return of approximately 10.2% on cost based on anticipated operating income for 2005."

Adjacent to the property are several outparcel tenants, including BJ's Wholesale Club, which owns its site and building, and Home Depot and Regal Cinemas, which own their buildings subject to ground leases with the mall's owner. In a related deal, PREIT has also agreed to acquire from an affiliate of Cumberland Mall Associates a vacant 1.7-acre outparcel.

Under the terms of the sale, PREIT will assume two mortgages. The first, with Wachovia Bank, amounts to $44 million at a 6.5% interest rate and a maturity date of December 2012. The second is a $3.9 million package at an interest rate of 5% and a maturity date of February 2014.

The rest of the purchase price, about $11.3 million, will be paid in the form of operating partnership units with a value based on the average of the closing price of PREIT's common shares on the 10 consecutive trading days immediately prior to the closing date of the transaction, which is expected in Q4. At the option of Cumberland Mall Associates, up to $1.25 million of the purchase price will be paid in cash in lieu of operating partnership units.

Instant Insights /

Cumberland Mall Sells for $60M

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