12/08/2010

Pru Seeks Partners to Build Trophy Mall in NJ

A Prudential Real Estate Investors partnership is seeking a developer and an equity partner to join forces on a super-luxury mall in suburban New York that could cost up to $1 billion to build.

The partnership has already secured zoning approvals for the 2.8 million-square-foot retail complex - the first phase of a massive planned mixed-use development. It would be constructed in Sayreville, N.J., about 30 miles from Manhattan. The site is just off the heavily traveled Garden State Parkway and less than five miles from its intersection with the New Jersey Turnpike.

Pru acquired the site in 2008 via a partnership with O'Neill Property of King of Prussia, Pa. The duo is now looking to sell a stake of 20-50% in the retail component, which is expected to cost $800 million to $1 billion. The projected unleveraged return for the new partners is 6-8%, although debt would likely be employed to juice the return and reduce the cash outlay.

The Pru partnership has tapped Jones Lang LaSalle to recruit two more partners - one that would handle the mall's development and kick in equity and one that would only supply capital. The total investment required by the partners would depend on the amount of leverage used.

Jones Lang kicked off its marketing campaign this week in conjunction with the International Council of Shopping Centers' national conference in New York. The brokerage planned to meet with four of the world's top mall developers. In its search for a capital partner, Jones Lang is approaching REITs, real estate funds, insurance companies, banks and sovereign wealth funds.

The project is billed as a "fortress mall" - designating retail properties with the highest quality and strongest sales. The partners are telling investors it would rank in the nation's Top 10 malls, among the likes of the Houston Galleria and the Mall at Short Hills in Millburn, N.J. The mall itself will encompass 2.2 million sf. There will also be a 625,000-sf power center.

The retail complex, which would face a 3.5-mile stretch of the Raritan River, would be followed by the development of 2,000 apartment units, 1 million sf of office space and a 750-room hotel, all on a 453-acre tract that was formerly a paint manufacturing plant. Pru and O'Neill bought the site two years ago from NL Industries of Dallas for $82.7 million.

The State of New Jersey has offered tens of millions of dollars in subsidies and other economic incentives for the project. The Pru partnership has embarked on an environmental cleanup for the first phase that is on track for completion by next September.

The mall is expected to draw 40 million shoppers each year, targeting both international travelers and local shoppers. Retailers would be offered 250,000 sf of signage visible to 400,000 cars daily. There are more than 50 ZIP codes nearby with average household incomes exceeding $125,000.

Requests for proposals are due in late January. The Pru team expects to select partners by next September.

Back Print