Chelsea Buys Two Outlet Malls for $103.3 Mil

"These acquisitions are part of our effort to be an active player in the ongoing consolidation of the outlet industry," according to David Bloom Chelsea's chairman/CEO. "We feel that market conditions will continue to yield acquisition opportunities that make sense, both in terms of immediate accretion and for upside potential. The Orlando purchase, in particular, is an example of the value that can be created and built upon."

In that Orlando deal, Chelsea bought out the 50% interest held by Simon Property Group in the Simon/Chelsea joint venture. The price tag for the half-interest in the 430,000-sf center was $76.3 million; the purchase price implies a cap rate of about 9.5%, according to Bloom. To complete the transaction, Chelsea put up $46.6 million in cash and assumed Simon's $29.7 million pro-rata share of existing mortgage debt. The two-year-old Orlando Premium Outlets features 120 high-fashion tenants and last year registered average per-sf retail sales of more than $550, according to Bloom.

And in a separate transaction, Chelsea has closed on the acquisition of Prime Outlets at Edinburgh, a 305,000-sf outlet center in Edinburgh, IN, located about 40 miles south of Indianapolis. Chelsea paid Prime Retail Inc. $27 million for the center, which was built in 1989 and expanded six years later. Prime Outlets at Edinburgh is currently 98% leased to tenants like Eddie Bauer, The Gap, Nautica, Nike and Tommy Hilfiger.

The latest acquisitions push Chelsea's portfolio to 58 outlet and community shopping center properties totaling more than 13 million sf in 28 states (mostly in the Midwest and South) and Japan. The company's tri-state region properties include Liberty Village in Flemington, NJ, Woodbury Common in Central Valley, NY and Clinton Crossing in Clinton, CT, all of which carry Chelsea's Premium Outlets brand. The company's biggest deal to date, of course, came last fall when it picked up 31 outlet and community centers from Raleigh, NC-based Konover Property Trust for $180 million.

"During a national conference call in late February, we provided guidance for a 10% increase in real estate-based funds from operations per share for 2002, including potential acquisitions," Bloom points out. "These two transactions very much solidify our progress toward achieving that goal."