Saul Takes Three Grocery-Anchored Shopping Centers for $168.5M

Saul Centers Inc. has increased its footprint in the metropolitan Washington, D.C./Baltimore area by 635,000 square feet with the purchase of three shopping centers for $168.5 million.

September 27, 2011
By Barbra Murray, Contributing Editor

Kentlands Square in Gaithersburg

Saul Centers Inc. has increased its footprint in the metropolitan Washington, D.C./Baltimore area by 635,000 square feet with the purchase of three shopping centers. The equity REIT acquired the grocery-anchored properties in a transaction valued at $168.5 million.

Saul Centers financed the acquisition of the properties through various means. The REIT relied on $60 million from two secured bridge loans; a $38 million non-recourse permanent loan collateralized by one of the assets; as well as $55.8 million of new equity through the issuance of 1,684,782 restricted shares of Saul Centers common stock and operating partnership units and $17.1 million in cash and borrowings from a line of credit.

All three neighborhood shopping centers are located in Maryland. In Gaithersburg, Saul Centers snapped up Kentlands Square, a 241,000 square-foot property. Developed in 1993 and anchored by a 61,000-square-foot Giant Food grocery store and a 104,000-square-foot Kmart, the fully leased center came with a price tag of $74.5 million.

Severna Park in Severna Park, Md., is also part of the portfolio. The 254,000-square-foot property, which first opened its doors in 1974 and underwent its most recent makeover in 2000, lists a 63,000-square-foot Giant Food market and a 92,000-square-foot Kohl’s as its leading tenants. The REIT acquired the 100 percent-occupied retail destination for $61 million.

Rounding out the group of assets is the fully leased, 140,000-square-foot Cranberry Square in Westminster, Md. A 63,000-square-foot Giant Food and a 24,000-square-foot Staples anchor the 20-year-old shopping center, which Saul Centers picked up for $33 million. Cranberry Square is 92 percent occupied.

Together, the three properties have an average occupancy level of 98 percent, a substantially higher occupancy level than the pool of shopping centers in their respective metropolitan market. The average shopping center vacancy rate in the Washington, DC, and Baltimore areas is 7.4 percent and 7.6 percent, respectively, according to ChainLinks Retail Advisors’ summer report.