Philly REIT Pays Off $400M Debt with $420M in Financing Deals

With the completion of $420 million in unsecured and secured financing deals involving four retail assets, Pennsylvania Real Estate Investment Trust has been able to repay the $400 million outstanding balance on a real estate mortgage investment conduit that was cross-collateralized with 15 properties. The Philadelphia-based company had assumed the REMIC, which carried an annual interest rate of 7.43 percent, in relation to its $1.3 billion acquisition of Crown American Realty Trust in 2003.  As for the secured loans, PREIT attained a total $290 million on four properties. The company received a $97 million non-recourse mortgage loan through Newark, N.J.-based Prudential Insurance Company of America at a fixed rate of 6.34 percent on the 715,000-square-foot Patrick Henry Mall in Newport News, Va. Hanover, Germany headquartered Norddeutsche Landesbank Girozentrale provided the remaining three loans, including a $68 million non-recourse mortgage loan on the 775,000-square-foot Logan Valley Mall in Altoona, Pa. Additionally, a $65 million non-recourse mortgage loan was placed on the 914,000-square-foot Wyoming Valley Mall in Wilkes-Barre, Pa.; and a $60 million mortgage facility that provides initial proceeds of $56 million with the option to increase the total loan amount to $60 million, was placed on the 490,000-square-foot Jacksonville Mall in Jacksonville, N.C. “Even though the properties are in secondary markets, they’re the dominant mall in their respective trade areas, so risks of competing retail are not as big,” Robert McCadden, PREIT executive vice president & CFO, told CPN of the factors that helped pave the way for obtaining the financing. The four shopping centers have an average occupancy level of 95.5 percent.  PREIT has had a long relationship with Prudential, but the company was entering new territory with its German lender. “This was our first time doing business with Norddeutsche Landesbank Girozentrale,” McCadden said. “They were interested in growing their market share in the U.S., and the three properties were just the right fit for them.”  In addition to the secured financing deals, PREIT borrowed $130 from a new unsecured term loan provided by a group of lenders led by Wells Fargo Bank, which served as agent, lead arranger and sole bookrunner on the transaction. The remainder of the financiers includes TD Bank N.A., US Bank N.A. and Wilmington Trust of Pennsylvania.  Established 48 years ago, PREIT holds the distinction of being one of the first equity REITs in the country. The company invests predominantly in retail shopping malls and power centers, mainly in the Mid-Atlantic region. Presently, PREIT has a retail portfolio that encompasses approximately 34 million square feet at 55 properties–four of which are currently in the development stage–in 13 states in the eastern half of the U.S.