WILMINGTON – Despite the coronavirus-spurred restrictions on retail and service businesses, Acadia Realty Trust signed off on a more than $40 million deal last week to complete its repurchase of the Brandywine Town Center, about 14 years after first selling a majority stake in it.
Acadia originally sold a 77.8% share of the nearly 1-million-square-foot shopping center to New York-based investment firm GDC Properties, but has been buying it back over the past two years for reasons that aren’t yet clear since neither party has yet to respond to Delaware Business Times email inquiries.
Acadia, a publicly traded real estate investment trust, has owned a more than 75% stake in the highly traveled shopping center near the Pennsylvania border since 2018, but it bought the final 24.78% of the property in an April 1 deal, according to county land records.
A GDC Properties affiliate sold the final portion for an unpublicized price, but a calculation of the state’s transfer tax pegs the sale at more than $40.7 million.
The sale comes amid a time that state-mandated closures have closed the Brandywine Town Center’s Regal Cinemas movie theater as well as retail stores like Old Navy, Dick’s Sporting Goods and Bob’s Discount Furniture. Anchor tenants like Target and Lowe’s Home Improvement have also cut hours in order to devote more time to cleaning the high-traffic stores.
The April 1 deal represents a return to full ownership for White Plains, N.Y.-based Acadia, which purchased the Brandywine Town Center and the nearby Market Square Shopping Center for $86 million in 2002. During its initial ownership, Acadia found tenants like Target, Lowe’s Home Improvement, Dick’s Sporting Goods, Bed Bath & Beyond, Trader Joe’s and TJ Maxx, and more. It also opened a satellite office in the shopping center that it continues to operate.
In 2006, however, Acadia sold 77.8% of the nearly 1 million square feet in shopping space to GDC in a $164 million deal. GDC held onto that majority stake for about a decade before beginning to sell back pieces to Acadia over the past two years. In total, GDC affiliates sold Acadia a 53% stake for an estimated total of $83.9 million, according to county land records.
Those sales came after a commercial mortgage-backed security (CMBS) for the property was rated the fifth worst CMBS loan loss in December 2016 by Trepp, a database for such debt securities. The $26.3 million note closed with a $15.8 million loss, due to the town center’s falling occupancy for a central portion of the center, Trepp reported. That loss was compounded when Access Group, a nonprofit student lender, did not renew its lease for roughly 76,000 square feet in May 2015.
After owning the majority stake in the town center for more than a decade, the combined resale value of about $124.6 million means that GDC lost about $39.4 million on its investment.
Much of those portions of the shopping center remain vacant today, totaling about 18% of space with five vacancies currently measuring more than 10,000 square feet, according to leasing materials from Acadia.