Developer Louis R. Cappelli has sold a majority stake in City Center in White Plains, relinquishing management of the commercial centerpiece of the city”™s downtown renaissance to an Illinois real estate investment trust for $53 million in cash, ownership shares valued at nearly $37 million and a refinancing deal that paid off his approximately $125 million mortgage on the property.
The new owner, Inland Diversified Real Estate Trust Inc., a public, nontraded company based in the Chicago suburb Oak Brook, valued the 382,000-square-foot City Center property at approximately $166.4 million. Cappelli”™s City Center companies, LC White Plains Retail L.L.C. and LC White Plains Recreation L.L.C., received Class B shares in the joint venture valued at $36.9 million, or about 22 percent of the property”™s value. Inland Diversified acquired Class A shares with its $53 million cash contribution, the company reported in a recent filing with the U.S. Securities and Exchange Commission.
The sale does not include the 154,200-square-foot Target PFresh store at City Center. Inland Diversified also acquired 99-year air rights over the City Center parking garage, which houses a New York Sports Club and 24 fully leased apartments.
Inland White Plains, the Illinois company”™s wholly owned subsidiary, will manage the partnership with Cappelli”™s company and will be solely responsible for managing City Center.
The fully leased City Center”™s anchor tenants include ShopRite Supermarkets, Nordstrom Rack, a 15-screen National Amusements movie theater, Barnes & Noble and New York Sports Club. Toys R Us signed a lease at City Center last spring and is expected to relocate from its nearby location in the Westchester Pavilion on South Broadway in March 2013.
Cappelli did not return a call for comment.
Cappelli, a decade ago, launched the remaking of downtown White Plains with the $320 million, 1.1.million-square-foot City Center complex, which also included two 35-story residential towers. The vacant former Macy”™s department store on Mamaroneck Avenue was demolished in 2001 to make way for the project.
In 2010, the developer settled a mutually acrimonious legal dispute with a former joint-venture partner, Kansas City-based Entertainment Properties Trust (EPT), over their properties and financial dealings in White Plains, New Rochelle and at the former Concord Resort in Sullivan County by agreeing to a property swap that gave Cappelli sole ownership of City Center. In exchange, Cappelli relinquished his 30 percent interest in the New Roc City retail and entertainment complex in downtown New Rochelle. EPT officials, who reported a $1.6 million loss at City Center in the first quarter of 2010 and had stopped cash investments in the property, were eager to unload it.
City Center”™s new owner, Inland Diversified, used $42.4 million of its cash contribution and $87 million from a $99 million mortgage loan from Bank of America to pay off Cappelli”™s $124.6 million mortgage loan on the property from Union Labor Life Insurance Co. (ULLICO) and a $4.8 million loan from the state Urban Development Corp. The 10-year Bank of America loan had a 2.67 percent annual interest rate at closing, compared with a 5.6 percent annual rate on Cappelli”™s ULLICO loan.
Inland Diversified owns about 7.2 million square feet of commercial real estate and 420 multifamily units in 24 states and has approximately $1.5 billion in assets. The company in August completed an initial public offering that raised more than $1.1 billion in capital.
Jeffrey Dunne, Steven Bardsley and David Gavin of CBRE Group Inc.”™s New York Institutional Group represented LC White Plains Retail L.L.C. and LC White Plains Recreation L.L.C, affiliated entities of Cappelli Group Inc., in arranging the sale. Joseph Cosenza, president of Inland Real Estate Acquisitions Inc. and a vice chairman of The Inland Real Estate Group Inc., represented the buyer.
Cosenza in a company press release called City Center “the best in-fill, in-city property purchase ever facilitated by Inland Real Estate Acquisitions.” Barry Lazarus, president and chief operating officer of Inland Diversified, called it “a tremendous addition to our portfolio.”
Editor’s note: Updated Oct. 11 to reflect the story in the Westchester County Business Journal Oct. 15 print edition.
