Cedar Acquires Trexler Mall for $29M

The acquisition involves an operating lease plus a purchase option after 10 years, "a structure that accommodates the seller's tax considerations," Leo Ullman, Cedar's president and CEO, tells GlobeSt.com. Identifying the seller only as "a partnership of investors run by a New York City lawyer," Ullman explains that, under this structure, "the seller can defer capital gains and preserve a depreciation deduction.

Ullman says Cedar has used this structure in the past. "We pride ourselves in working with owners and sellers to meet their needs. Our cost of capital is higher than some of the bigger buyers, so we work to be flexible in order to compete."

At the close of the agreement this August, Ullman says Cedar will pay the seller between $5.5 million and $5.7 million in cash from its revolving credit facility and also assume just under $23.3 million of first-mortgage financing at 5.42% due in 2014. After exercising the purchase option in 10 years, "there will be a modest added cost for inflation," he adds.

The Trexler asset is Cedar's first in the Lehigh Valley, "but complementary to our other Pennsylvania properties," Ullman says, "and a natural for us." He says the valley is very competitive and especially active in retail now. "We saw an opportunity in below market rents for Bon-Ton and Giant, for example, and we're acquiring it at attractive ups in existing leases." Another motivating factor, he says is its proximity to other retail in the area, including a Super Wal-Mart.

Trexlor anchors include an 88,000-sf Kohl's department store, a 62,000-sf Bon-Ton department store and a 56,570-sf Giant supermarket. Asked if Cedar would redevelop, upgrade or expand the property, a practice it often pursues, Ullman says, "this is a mature property. Giant would wish to expand, if we could accommodate it, and, if there is any expansion at the center, it will be by Giant and other internal tenants."

Joseph Mersel of Norfolk, VA-based S.L. Nusbaum Realty Co. represented the seller. The law firm of Stroock Stroock and Lavan advised Cedar on tax law, and White Plains-based Warren Sach PC represented it in the real estate transaction.