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NEW YORK CITY-Long Island mall REIT Acadia Realty Trust has further pared its Kmart exposure with the opportunistic sale of two shopping centers. The buyer is Valley Stream, NY-based real estate investment fund Armstrong Capital LLC, which picked up the properties for $16.8 million.

Manahawkin Village Shopping Center, located in Manahawkin, NJ, is anchored by a 112,000-sf Kmart. Additional tenants include a Hoyt’s 10-Plex theater and a 5,950-sf Mandees. Kmart’s base rent at this center was the highest among all of the Kmart locations within Acadia’s portfolio. The 175,987-sf community shopping center is located 30 miles north of Atlantic City.

The second property, Valmont Plaza, is a 200,000-sf shopping center located in West Hazelton, PA. Acadia recently finalized a 41,000-sf lease with Big Lots as a new anchor for the center. The company eliminated $7.3 million of debt in the sale, $4 million of which was above-market fixed rate debt. Acadia provided the buyer with $12.6 million in short-term financing for the acquisition, which is expected to be repaid by year’s end.

The REIT now has five Kmart locations left in its portfolio. In addition, the company has a 49% joint venture interest in a shopping center located in White Plains, NY.

“The sales were motivated by two primary factors,” Acadia spokesman Jon Grisham tells GlobeSt.com. “Second, it was a very opportunistic sale at a very good price. Our thought is that we can very profitably redeploy this capital into our new acquisition joint venture, Acadia Strategic Fund. It’s a JV with four of our largest institutional investors.”

The fund, which recently purchased three properties, is committed to acquiring $300 million in shopping center assets on a leveraged basis.  Earlier this year, Acadia had completed its non-core property disposition initiative, which included the sale of six Ames and three Kmart locations. Both chains are in bankruptcy. Today’s sales are part of the Company’s ongoing capital recycling program.

“This transaction enables us to efficiently recycle capital and maximize the return to our shareholders by reinvesting capital in more accretive opportunities,” says Kenneth Bernstein, Acadia president and CEO. “Second, this it reduces our exposure to Kmart. Although our Kmart stores, including the Manahawkin Shopping Center location, are productive with above average sales, this transaction is important in achieving our goal to diversify our national tenant base and to reduce our exposure to any one retailer, including Kmart.”

Acadia currently owns (or has a joint venture interest in) and operates 36 properties totaling approximately seven million sf, located primarily in the Eastern and Midwestern regions of the United States.

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