PREIT Refinances Mall for $200M

CHERRY HILL, NJ-Pennsylvania Real Estate Investment Trust has refinanced its Cherry Hill Mall here with a new $200-million first mortgage, according to company officials. The funding was obtained from Prudential Mortgage Capital Co. and Northwestern Mutual.According to details released by PREIT, the loan carries an interest rate of 5.42% and will mature in October 2012. Under the terms of the mortgage, PREIT will be able to convert the loan to a senior unsecured loan under prescribed conditions, including the achievement of a specified credit rating. A portion of the loan proceeds is being used to repay the previous mortgage, which PREIT assumed when it bought into Cherry Hill Mall just over two years ago. The previous loan had an interest rate of 10.6% and had a balance of $70.2 million."The refinancing of the this mortgage loan is an important milestone in the execution of our capital plan," says Robert McFadden, PREIT's chief financial officer. "The excess proceeds will reduce outstanding borrowings under our credit facility, which will provide us with additional flexibility in funding our various redevelopment initiatives and our other capital requirements."The 1.27-million-sf Cherry Hill Mall, anchored by Strawbridge's, J.C. Penney and Macy's department stores, initially came into PREIT's hands in April 2003 when it bought a 49% of the partnership interests in New Castle Associates, a holding company, as part of a deal in which it acquired a half-dozen enclosed malls in the Philadelphia/South Jersey area from the Rouse Co. The Cherry Hill Mall portion of the package involved 585,000 PREIT operating partnership units issued at $29.285 per unit.PREIT subsequently boosted its share in New Castle Associates to 73% for $31 million in cash. And in June 2004, PREIT bought out the remaining 27% ownership in the sprawling property from New Castle Associates for 609,000 operating partnership units at $29.29 per unit.Cherry Hill Mall, one of the oldest enclosed regional malls in the country, dating back to the 1960s, is currently approximately 95% leased. For the first half of this year, the property generated a sales volume in the vicinity of $420 per sf.