NEW YORK — Federated Department Stores Inc. is divesting itself of another historic downtown flagship — Strawbridge’s in Philadelphia.
The company said Wednesday that it has agreed to sell the 550,000-square-foot Strawbridge’s building to Pennsylvania Real Estate Investment Trust [PREIT] for an undisclosed price.
The deal marks another step forward in Federated’s strategy to jettison 80 locations acquired in last year’s acquisition of May Department Stores. The units are in shopping malls and cities where Federated already has a store or two.
Last week, Federated announced that it would sell the landmark Filene’s flagship in Boston to Vornado Realty Trust, which is expected to convert that store to condominiums, offices and some new retail space. In that case, Federated disclosed the $100 million purchase price because the amount was material to both companies. The Strawbridge’s deal is not considered material, said Federated spokesman Jim Sluzewski. He added that the proceeds from this transaction are included in the previously announced $400 million to $500 million after-tax total anticipated from the sale of duplicate stores nationwide.
Federated has announced buyers for 58 duplicate locations, including Strawbridge’s, a Philadelphia icon that opened in 1868 and occupied eight levels of a 15-story building. The store closed last month. The other levels are offices.
Strawbridge’s anchors a moderate-priced urban mall owned by PREIT called The Gallery at Market East, which also houses Kmart, Old Navy, Burlington Coat, Bath & Body Works, Foot Locker and The Children’s Place, among other stores. PREIT bought Strawbridge’s to convert the site in a way that enhances the mall. “We want it to continue to be a retail anchor,” said Joseph F. Coradino, president of PREIT Services, the management company that manages and leases all PREIT malls. “We’ll probably end up with 200,000 square feet of retail, and the upper floors will probably be office space.”
Coradino said discussions with traditional and discount department stores and category killers are being held. He expects to have a tenant by year’s end.
Federated continues to have a presence in downtown Philadelphia with a Macy’s unit set to open Aug. 2 in another historic site, the former John Wanamaker flagship, which has been operating as a Lord & Taylor unit. Federated inherited Lord & Taylor in the May acquisition and last month announced an almost $2 billion deal to sell L&T to NRDC Equity Partners.
The Strawbridge’s transaction is expected to be completed in the third quarter of 2006. Pennsylvania Real Estate Investment Trust owns 54 retail properties, including 40 shopping malls and 14 strip malls and power centers, totaling nearly 33.4 million square feet in 14 states. The company also provides management, leasing and development services to 18 retail properties occupying a total of 6.9 million square feet, as well as six office buildings and two multifamily properties.