PHILADELPHIA—Santa Monica, CA-based Macerich Co. has reached an agreement with Pennsylvania Real Estate Investment Trust to pay $106.8 million for a 50% common ownership interest in The Gallery retail property here.

The two companies will engage in a joint venture to redevelop the 1.4-million-square-foot retail property in downtown Philadelphia at 9th and Market streets into a major mixed-use project. Macerich and PREIT will jointly handle the development, leasing and management of The Gallery. Costs related to the future development will be split 50/50 between the companies.

The joint venture is expected to build upon the previously announced Century 21 anchor transaction and “realize PREIT's vision to create Philadelphia's only transit-oriented, retail anchored multi-use property offering accessible luxury retailing and artisan food experiences,” PREIT states in its announcement.

"We are thrilled to be partnering with Macerich, an established developer and operator, to bring a one-of-a-kind, premier center to Philadelphia," says Joseph F. Coradino, CEO of PREIT. "Macerich has a proven track record of developing leading properties in attractive U.S. markets and we look forward to leveraging their deep experience and strong leasing relationships to unlock significant value in The Gallery. This joint venture allows PREIT to maintain a strong balance sheet and minimize execution risk as we continue to capitalize on strategic opportunities to enhance our portfolio, for the benefit of all PREIT shareholders."

Art Coppola, chairman and CEO of Macerich, adds, "This joint venture represents a great opportunity to participate in one of the top real estate markets in the United States with a high quality asset. The Gallery is aligned with the type of assets we look for; it has dominant positioning and strong long-term growth prospects. I look forward to working closely with the management team at PREIT as we combine our knowledge and skills to create an unparalleled shopping and dining environment for shoppers."