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BALA CYNWYD, PA-After 18 months of negotiations, locally based Powell Arms, VP of Jacksonville, FL-based Regency Centers Inc., closed on the acquisition of Gateway Shopping Center in Wayne. He would not disclose the price, but acknowledges, “We paid a premium,” and adds, “it was closer to the top of the market than the median.”

The median price for multi-tenant retail in Greater Philadelphia is approximately $100 per sf, according to Marcus & Millichap. However, Village at Cambridge Crossing in Mt. Laurel, NJ traded for $169 per sf, and Regency paid nearly $198 per sf this year for a center in San Ramon, CA. On condition of anonymity, an area retail broker tells that Regency’s price for Gateway “was certainly north of $150 per sf, probably in excess of $35 million.”

The seller, Azco Partners, a family firm, owned the 221,840-sf center for the past 40 years and, according to Arms, “had no intention of selling.” What changed their minds? “Good old-fashioned persistence,” he says. “Really, it was the overall economics. Interest rates and cap rates are at an all-time high, the capital gains tax is at 15%, and Regency had the ability to do some things that other companies could not do in order to further defer capital gains taxes.” The sale included assumption of debt, which Arms would not quantify, cash, and shares of Regency stock.

“Gateway is one of the premier centers in the Delaware Valley,” Arms adds, “and it justified the premium. It has a great location in a growing, high-income area; and it’s virtually 100% occupied with good, very stabile tenants.” Gateway is anchored by a 24,000-sf Staples, a 28,000-sf TJ Maxx, and a Trader Joe’s grocery, which plans a 25% expansion. There are about 50 small-shop tenants, including JoAnn’s Fabrics, Dress Barn, Outback Steakhouse and Famous Footwear.

Arms left Philadelphia-based Pennsylvania Real Estate Investment Trust two years ago to set up a Regency office here where he is charged with acquisitions and development from Baltimore to New England. This is the first, but certainly not the last, of Regency-owned centers in this area, he tells, adding “Greater Philadelphia is the fourth largest retail market in the country. If Regency wants to be the nation’s leading developer/owner of grocery-anchored retail, we have to be here.”

He says Regency has five development projects on parcels ranging from 1.5 acres to 66 acres around Pennsylvania and the New Jersey area of metropolitan Philadelphia “in some stage of municipal approval. And we have plenty more in our sights.” Plans include the acquisition of “extremely well located, dominant, open-air centers, anchored by the area’s dominant grocer,” Arms says, “and development of open-air retail as small as free-standing units up to 600,000-sf power centers, anchored by, say, Target or Home Depot.”

Beyond Greater Philadelphia, in late 2003, Regency acquired 20 acres in Merrimac, NH. It will sell an existing office and develop a 90,000-sf, grocery-anchored center on the remaining 10 acres. “Ground will break in spring 2005, and it will open in spring 2006,” Arms says.

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