366,000-SF Power Center Sells for $64M

MOUNT OLIVE, NJ-AIG Baker has sold ITC Crossing South Shopping Center, a 366,000-sf power center, to TIC buyer SCI Real Estate Investments of Los Angeles, for $64.3 million. The sale price for the shopping center factors out to nearly $176 per sf. ITC Crossing South is part of the larger ITC Crossing, a 700,000-sf shopping center, and ITC Crossing North remains in the portfolio of the Birmingham, AL-based AIG Baker, for now.

The deal has been in the works since late 2005, according to Richard Walter, president of the Irvine, CA-based Faris Lee, who brokered the sale on behalf of the buyer with colleague Donald MacLellan. AIG Baker was represented in-house.

"This transaction was extremely complicated and included a diversity of issues," Walter says. "ITC Crossing South is a prime example of a complex deal needing the ultimate in strategy." According to MacLellan, managing director of Faris Lee's Investment Advisory Group, those issues during due diligence involved the movement of retaining walls and drainage system cracks relating to original construction, which took place in 2002.

"There was also a property tax reimbursement issue, as well as wetlands problems near the property," MacLellan says. "Many times, the most challenging deals, when overcome, produce investments with the greatest rewards. This center has a prime tenant mix with 100% occupancy, a great location near I-80, and the buyer would own all the restaurant pads, including McDonald's, Pan era Bread, Applebee's, Longhorn Steak and Wendy's."

Located on nearly 47 acres adjacent to the International Trade Center, a business park that includes a foreign-trade zone, ITC Crossing South is anchored, besides the restaurants, by Lowes, Michaels, Bed Bath & Beyond, TJ Maxx, Babies R Us, Pet Smart and Old Navy. It's also shadow-anchored by Wal-Mart.

During the transaction, Faris Lee also negotiated a closing structure so that an additional portion of the property will close in early 2007, "once certain thresholds are met," Walter says. "This included very comprehensive agreements covering adjacent infrastructure issues. This was not just a 'brokerage' deal."

The Faris Lee brokers also assisted with the financing structure for the center, and advised on a plan for a forward rate lock "months in advance of the closing to keep SCI in the deal," according to Walter. "As anticipated, interest rates had risen by the time the rate was locked in." The deal also included a pay-down of the rate to be shared among the buyer and the seller to keep the original sales price intact.