Cedar Plans Repositioning of $14M Columbia Mall Buy

BLOOMSBURG, PA-Cedar Shopping Centers Inc. continued its rapid pace of Pennsylvania shopping center acquisitions with the purchase of 408,000-sf Columbia Mall here from a seller Leo Ullman, Cedar's CEO, describes only as a "major developer not based locally." The price tag is approximately $14 million, exclusive of closing costs, or just over $34 per sf. This is the Port Washington, NY-based shopping center REIT's 12th acquisition in Pennsylvania in the past five months.

The property was built in 1988 and renovated in 1998, Mike Winters, Cedar's director of acquisitions, tells GlobeSt.com. It is anchored by a 64,000-sf Sears, a 45,000-sf Bon Ton, and a 34,000-sf JC Penney. Approximately 100,000 sf are vacant, which is attributable primarily to a former Ames store.

The property will be unencumbered at the closing, which is expected to take place during the first week of October. Cedar expects to fund the acquisition from its secured revolving credit facility. It's being acquired at an unleveraged cash-on-cash yield in excess of 8% and is a candidate for redevelopment.

In a statement, Tom Richey, Cedar's VP of development and construction, says, "we are not paying for vacant space," and adds, "the existing anchor rents, we believe, are well below market. The good condition of the mall area, coupled with no elevation problems and its excellent location at the intersection of I 80 and Rte. 42, greatly enhances our ability to promptly achieve a successful repositioning."

Ullman calls this area "the central Pennsylvania sweet spot of our portfolio." He tells GlobeSt.com, "we've been able to recycle Ames stores either by dividing up the space or obtaining another large-space retailer. We won't have to buy out tenants; many are on short-term or terminable leases." He says the cost of redevelopment is not yet determined, but estimates, "it could probably be done for less than $20 million or so." He estimates total redevelopment will take between two and three years.

Meanwhile, a new 91,000-sf prototype Giant Food Store that includes 27,000 sf of mezzanine space, reaches completion at Cedar's 500,000-sf Camp Hill shopping center. It is the largest unit in the Giant chain. In early October, the grocer will relocate from its existing 42,000-sf unit in Camp Hill.

At that time, the existing unit will be demolished to make way for a new L.A. Fitness facility, scheduled for completion in summer 2006. Ullman says, a 40,000-sf Orthopedic Institute of Pennsylvania unit will be delivered at Camp Hill in first quarter 2006. That, along with the L.A. Fitness unit "will leave just about 8,000 sf vacant next to L.A. Fitness. We're essentially fully leased."