Pennsylvania REIT, based in Philadelphia, will take over the mall in exchange for $340 million in cash and $125 million of partnership units, Vornado said in a statement today. The deal will be treated as a tax-free exchange for income tax purposes. New York-based Vornado expects to record a non-cash impairment of about $20 million in the first quarter.
Vornado has been selling assets for almost two years to focus on its New York and Washington office properties and Manhattan street retail investments. Last week, Chairman Steven Roth told analysts the company had about $1.1 billion of assets for sale, “and we have more on deck.”
Vornado will complete a renovation under way at the 1.4 million-square-foot (130,000-square-meter) Springfield mall. About $130 million will be spent on the project this year and another $22.4 million next year, the company said in its annual report. The project is expected to be done by the end of 2014, with closing of the Pennsylvania REIT (PEI) transaction projected for no later than March 31, 2015.
The mall, in the northern Virginia suburb of Springfield, southwest of Washington, serves a population of about 800,000 with an average household income of more than $117,000, according to its website.
Vornado will be a passive investor in Pennsylvania REIT after the deal, subject to an equity ownership limit of 9.9 percent, Pennsylvania REIT said in a separate statement.
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