Cleveland — Australian investment manager QIC and Forest City Enterprises Inc. (NYSE: FCEA and FCEB) have agreed to form a joint venture to recapitalize and invest in eight of Forest City's regional retail malls worth a combined $2.05 billion.
Under the agreement, the Brisbane-based firm will pay AU$435.6 million (US$420.5 million) for 49 percent of the ventures. Forest City intends to use proceeds to pay down debt, fund expansion and new development. Sales at the eight malls currently average about $500 per square foot on a rolling 12-month basis.
Upon closing of the transaction, Cleveland-based Forest City expects to raise cash liquidity of $330 million, after transaction costs. The company plans to use a majority of the liquidity to reduce debt, but also expects to use a portion to fund expansion and reinvestment initiatives. Closing of the joint ventures is expected to occur before the end of the company's fiscal third quarter.
Ownership of the individual properties, at closing, will vary based on existing partnerships currently in place at three of the malls. Forest City will be the managing member of the individual joint ventures and will continue to be responsible for leasing, operations, marketing, financing, development services and asset management of the properties.
Steven Leigh, managing director of QIC Global Real Estate, says the joint venture represents a significant step in QIC's long-term investment strategy. "Expansion into the United States retail sector is a natural progression and comes after extensive investigation of the real estate market."
"We are pleased to partner with QIC, an experienced global investor, to invest in and enhance these strong retail centers," says David LaRue, Forest City president and CEO. "This is another example of our strategy of securing strategic capital partners to invest with us in both existing assets and new opportunities."
Preliminary priorities for the joint venture will be renovation and/or expansion of four malls: Galleria at Sunset in Henderson, Nev.; Antelope Valley Mall in Palmdale, Calif.; Short Pump Town Center in Richmond, Va.; and South Bay Galleria in Redondo Beach, Calif. The other properties included in the joint venture are Victoria Gardens in Rancho Cucamonga, Calif.; Charleston Town Center in Charleston, W. Va.; Mall at Robinson near Pittsburgh, Pa.; and Promenade in Temecula, Calif.
Forest City, which owns, develops, manages and acquires commercial and residential real estate and land throughout the country, owns $10.6 billion in total assets.
QIC is one of Australia's largest institutional investment managers with $71.3 billion in funds under management. The majority of its real estate portfolio is invested in retail and office assets across Australia, the U.K. and the U.S.
— Rachel Goff