Madison International buys into $851.5m Forest City portfolio

Madison International Realty, the New York-based private equity real estate firm, has acquired stakes in a portfolio of 15 retail and entertainment properties in and around the city in a deal valuing the assets at $851.5 million.

Madison International has assumed a 49 percent equity interest in the portfolio for $172.3 million while also agreeing to take over $499.9 million of associated debt, according to a statement on the deal.

The stake in the portfolio was sold by Cleveland-based developer Forest City, one of the largest developers in the US with $11.8 billion of assets under management, which, via various subsidiaries, has retained the remaining 51 percent stake. The transaction reflects a yield of 6.9 percent based on the net operating income for the properties in 2010.

The properties include 42nd Street Retail and Entertainment Complex and Harlem Center in Manhattan, as well as assets in Brooklyn, Queens, the Bronx, Staten Island, and New Jersey.

Ronald Dickerman, president and founder of Madison International Realty, which was established in 1996, said: “These are high-quality, productive specialty centers in good locations in one of the strongest markets in the country. We believe these assets have the ability to generate above average NOI growth in this under-retailed market.”

Charles Ratner, president and chief executive officer at Forest City said the investment by Madison International would create liquidity for the firm and that further investment partnerships could between the two companies could be formed in future: “This transaction also positions us with an experienced and well-respected real estate investor in Madison, and we look forward to exploring
other mutually beneficial opportunities with them in the future,” he said.

The statement on the deal did not reveal which fund Madison used to make its investment however only last month the firm closed on $510 million for its fourth opportunity fund, more than 20 percent more than it originally targeted for the vehicle.

The Madison International Real Estate Liquidity Fund IV, which will be used to acquire LP and partial ownership interests in core real estate in the US, UK and Western Europe, attracted commitments from more than 70 investors.