Madison International Agrees to Buy Forest City’s $1B New York Retail Portfolio

The deal will be sealed in the fourth quarter

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Madison International Realty has officially agreed to purchase Forest City Realty Trust’s 51 percent interest in its 2.1-million-square foot New York City/ New Jersey retail portfolio, valued at $1 billion, according to announcements from both firms today.

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Madison already held a 49 percent interest in the 12-asset portfolio, known as the “NYC portfolio,” and now owns it outright. The properties include Atlantic Center, Atlantic Terminal, Harlem Center and the Shops at Richmond Avenue. Madison is now mulling a potential redevelopment of Atlantic Terminal Mall and Atlantic Center, according to the announcement.

The transaction is expected to close in the fourth quarter, and will be capitalized with ‘significant follow-on investment from the existing NYC Portfolio investors.’

In August last year, Forest City announced that it would explore “strategic alternatives,” for its retail portfolios and begin exiting the retail business. While Madison agreed to acquire the New York City/ New Jersey assets, Australian investor QIC agreed to buy out Forest City on a portfolio of national assets.

In May, Ronald Dickerman, Madison’s president and founder, described to Commercial Observer how the NYC Portfolio partnership first came about.

“In 2010, Forest City was building Barclays Center, which at the time was a hole in the ground. It was looking at a $1 billion development check in order to complete it, and so it was very creative in looking for a way to raise money,” Dickerman said. “Forest City said, ‘You know, we have 2.5 million square feet of retail space in New York, so why don’t we go sell a piece, take on a partner and use some of that capital to build Barclays Center.’ ”

Madison snapped up a 49 percent interest in the portfolio one year later for $180 million.

“That partnership has been really strong,” Dickerman told CO at the time. “Then, Forest City made the strategic decision to exit the retail business, and that’s where we find ourselves today.”

Madison’s purchase of the 95 percent-leased portfolio now presents an opportunity for the firm to become one of New York City’s largest landlords, the announcement said.

“This transaction is strategic for both Madison and Forest City, and fits well with our investment strategy of executing large scale equity investments to create ‘win/win’ outcomes for our partners and investors,” Dickerman said in prepared remarks. “The retail centers in the NYC Portfolio are in densely-populated, well-trafficked areas that offer significant opportunity for continued value creation.”

 “Today’s announcement is an important step in the ongoing execution of our strategic plan and is another example of delivering on our commitment to create value,” David LaRue, Forest City’s president and chief executive officer, said in the company’s announcement. “Madison International has been a great partner for the past six-plus years in these high-quality assets, and I salute the teams on both sides for bringing this large and complex transaction to fruition.”

Cushman & Wakefield has been hired as the third-party property management and leasing team for the portfolio.