TRD: Madison International, four years after buying Atlantic Terminal/Center malls from Forest City, still trying to upgrade

From The Real Deal's The Closing: Ron Dickerman, a 10/5/21 interview:

As the founder of Madison International Realty, which over the past two decades has pumped north of $17 billion into real estate assets, Dickerman is one of the industry’s biggest secondary investors, focused on owning minority positions in big-ticket properties...

Madison owns or has owned pieces of the Seagram Building on Park Avenue, the Lloyd’s building in London and the Trianon tower in Frankfurt, Germany. Dickerman developed a niche of serving as a port of call for real estate syndicators who needed to cash out on their stakes in buildings before their partners were ready to sell.

One set of questions concerns Madison International's two-stage transaction, first in 2011 purchasing a 49% stake in Forest City Ratner's/Forest City New York's local retail portfolio, then, in 2017 buying the rest, as the parent company, Forest City Retail Trust, was trying to raise cash and streamline its operatons.

Did the business change when you bought Forest City’s retail?

That was a change in the business strategy, but it happened for a reason. Barclays Center was a hole in the ground, and it was about a $1 billion development check at the time. Forest City’s CEO said, “What we’re going to do is go out into the marketplace and sell down a 49 percent interest.” That was our aha moment, and we said, “That could be a transaction for us.” We shook hands and ended up writing them a $200 million equity check.

Note that, while there was a financing gap, most of the "development check" was paid for by tax-exempt bonds, plus government subsidies. But Forest City needed the liquidity. The deal was announced in March 2011 as $172.3 million in cash. 

Cost of the deal?

Dickerman continued:

Five years went by, and Forest City’s stock was sluggish. So they called us and said, “We’re getting out of the retail business.” It took us about 30 seconds to turn the conversation around. So we wrote them another $300 million check, and we bought the entire portfolio outright. It was a little bit of a twist, but we had the opportunity and we took it.

Note that, upon the consummation of the deal, the two companies issued press releases citing a "gross value of approximately $1.0 billion." Even 51% of that is well north of $300 million.

 

What's next?

The mall seems like it’s sort of stuck in the early 2000s.

We’ve got unbelievable frontage on Atlantic Avenue directly across from Barclays Center. And yet, because the leases are so long, it limits our flexibility in terms of leasing these assets up and making them interesting and exciting. So what we’ve been doing is trying to move the tenancy into the current century.

That's a little self-serving. Dickerman has been talking for four years about repositioning the mall(s) and Atlantic Center does have some ground floor empty space across from the arena. From September 2017 coverage in Crain's New York Business:

Included in the plans are an increased number of food options and the installation of a roof deck that Dickerman said would lure larger crowds from the Barclays Center.

Neither have come to fruition, yet.