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CHICAGO-Trizec Properties Inc. has shed the 445,000-sf Desert Passage retail and entertainment property from its portfolio in a $240.5-million deal that moves it one step closer to becoming a pure office REIT. New York-based Investcorp provided 90% of the equity in the purchase by affiliates of RFR Holding LLC and Sutton East Corp.

Earlier this year, Trizec Properties sold the 565,000-sf Paseo Colorado in Pasadena, CA for $113.5 million, with has a third retail development, the 1.2-million-sf Hollywood and Highland, on the market.

Urban Retail Properties Co. will manage Desert Passage, connected to the Aladdin Hotel & Casino on Las Vegas Boulevard. Although sales per sf are among the highest in the US, occupancy at Desert Passage stood at 76% to start the fourth quarter, according to the REIT’s most recent earnings report.

“Desert Passage represents an opportunity to own a high-quality property with significant potential located at a prime intersection on the Strip at an investment basis considerably below replacement cost,” says Investcorp managing director John R. Fraser.

For Trizec Properties, the deal also wipes $178 million in debt off the balance sheet. The Desert Passage sale lops off nearly one-third of Trizec Properties’ $541.8-million mortgage debt.

“This will provide us with additional flexibility to take advantage of opportunities that should emerge as the economy and the office property markets recover during the next couple of years,” says Trizec Properties CEO Timothy Callahan.

In addition to shedding non-office properties, Trizec Properties has spent the year exiting “non-core” markets, including Detroit, Memphis, West Palm Beach and the Los Angeles Airport submarket. The REIT still has one office asset in Pittsburgh, as well as two each in Charlotte, Minneapolis and St. Louis.

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