Lightstone sells Prime Outlets for total $2.3bn

The Lightstone Group has sold the outlet shopping centre group Prime Outlets in a deal valued at more than $2.3 billion.

The private equity real estate firm, founded by David Lichtenstein, sold the 22-property group to US REIT Simon Property Group.

According to various media reports, Simon paid $700 million in cash for Prime (80 percent in cash and 20 percent in preferred stock), with the assumption of $1.2 billion of securitised mortgages and $400 million of other debt. A Wall Street Journal report cited people familiar with the matter as saying none of the mortgages are delinquent.

Lichtenstein said in a statement the deal was a “win-win” situation for both parties. It comes after Lightstone's hotel portfolio company, Extended Stay, was forced to file for Chapter 11 bankruptcy protection in June owing to significant over-leverage, with projected cash flows unable to cover more than $7 billion in debt.

The Prime Outlets portfolio comprises more than 8.2 million-square-feet of space, with 22 outlet centres in locations such as Washington DC, Baltimore, San Antonio, Orlando, and Williamsburg, Virginia. The outlets’ average annual sales per square foot, as of 30 June, 2009, was $370 compared to a reported $500 for Simon.

David Simon, chairman and CEO of Simon Property, said the deal was a strong “strategic fit” for the REIT, taking its outlet portfolio to 63 centres, covering 25 million-square-feet.

The REIT has an enviable war chest of capital to deploy, after raising $1.2 billion in share offerings earlier this year and also announcing this week a new $3.5 billion unsecured credit facility. The revolver is on top of an existing $3.5 billion credit line. Simon said in a statement the revolver could be increased to $4 billion and will mature at the end of March, 2013.

Lightstone bought Prime Retail in a deal estimated at $626 million in December 2003, according to data provider Real Capital Analytics.