Prudential Mortgage Capital Co. and Northwestern Mutual commit to a $200-million first mortgage, secured by the 1.3-million-sf Cherry Hill Mall. It carries an interest rate of 5.42%, which includes the cost to lock in the rate until closing, and will mature in October 2012. A portion of the loan proceeds will be used to repay the existing mortgage, which PREIT assumed in connection with its acquisition of the asset. The existing loan has an interest rate of 10.6% and will have a balance of approximately $70 million at the expected date of repayment.
Prudential and an unidentified institutional lender signed PREIT's application for a $160-million first mortgage, secured by the 1.2-million-sf Willow Grove asset. It will bear interest at an annual rate of 5.65%, including the cost of locking in the rate until closing, and will mature in December 2015. A portion of the proceeds will be used to repay the existing Willow Grove Park first mortgage, which has an interest rate of 8.39% and will have a balance of approximately $108 million at the anticipated date of repayment.
Under both agreements, PREIT will have the ability to convert the mortgage loans to senior unsecured loans under certain conditions, including the achievement of a credit rating specified in the agreements. Completion of both transactions will provide PREIT with approximately $182 million in net proceeds, according to Robert McCadden, CFO. These proceeds will be used to repay borrowings under the company's credit facility and "provide us with additional liquidity to fund investment opportunities," he said in a statement.
"Also, upon closing, we will be able to capture the benefit of replacing above-market debt with borrowings at current interest rates while reducing our exposure to future rate increases," he said. "We plan to continue to pursue other refinancing opportunities which will strengthen our balance sheet and improve PREIT's credit quality."
Cherry Hill Mall was completed in 1961 and PREIT acquired it in 2003 as part of a multi-property portfolio it purchased from Rouse Co. Willow Grove Park opened in 1982, was acquired by PREIT in 2000 for $140 million, and renovated in 2001.
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