Madison International Buys Forest City Retail Stake for $1B

By Keith Loria

Atlantic Terminal Mall in Brooklyn, NYC

Madison International Realty will acquire Forest City Realty Trust’s 51 percent interest in a 2.1-million-square-foot, 12-asset, prime retail portfolio located throughout the five boroughs of New York and Northern New Jersey, for approximately $1 billion.

Madison already holds a 49 percent stake in the portfolio.

“We have been partners in this portfolio with Forest City for more than six years, so we know these properties well and understand their resilience to the constantly shifting retail landscape,” Ronald Dickerman, Madison International Realty’s founder & president, told Commercial Property Executive. “The infill locations provide a collar around supply that is almost unparalleled in the U.S. The locations combined with the fundamentals of this portfolio—95 percent leased to a great mix of international, national and local retailers with significant weighted average term remaining—presented us with a significant opportunity.”

The acquisition is consistent with Madison’s view that brick and mortar stores located in high density growth areas in gateway markets will continue to play a critical role in the evolution of retail.

A win-win outcome

According to Dickerman, Madison prides itself on being an investment manager that is willing to look at transactions that would be considered too complex by many others and create “win/win” outcomes for its partners and investors. This deal was one of those complex transactions positioned to maximize returns for its investors.    

“We believe that the headwinds caused by negative retail headlines provide profound opportunity for smart, patient capital,” he said. “This acquisition allows us to capitalize on that opportunity while executing on our strong conviction that brick and mortar stores located in high density areas of gateway markets will continue to play a critical role in the evolution of retail.”

The assets in the portfolio are located in some of the most supply-constrained, densely populated and demographically diverse submarkets in the five boroughs.

“Location is a major part of the investment thesis here,” Dickerman said. “We believe there is opportunity to build on Forest City’s success in the portfolio by continuing to offer high-quality, destination retail centers that cater to individual submarkets and neighborhoods.”

The portfolio is currently 95 percent leased. Madison plans to invest tens of millions of dollars repositioning the two centers located across Atlantic Avenue from the Barclays Center.

“The plan is to complete interior and exterior upgrades to attract a mix of experiential and food tenants to the centers,” Dickerman said. “We are also exploring a roof top attraction. The idea is to lure the large crowds attending one of hundreds of events hosted annually at the Barclays Center.”

Cushman & Wakefield will act as the third-party property management and leasing team for the portfolio.

In addition to this deal, Madison is contemplating redeveloping the Atlantic Terminal Mall and Atlantic Center, two properties located directly across Atlantic Avenue from the Barclays Center Arena.

Earlier this year, Madison partnered with DDR Corp. to refinance 52 grocery-anchored shopping centers totaling 7 million square feet.