Under the deal, Pennsylvania Real Estate Investment Trust, as PREIT is formally known, would sell a lower section of the former department store building for $3 million during the first three months of 2021, according to the documents filed last week.
The buyer is identified as 801 Market Partners LLC, a company formed in July by Alterra partner and general counsel Jeffrey J. Pustizzi, state records show. The bankruptcy documents refer to the property as the “Heirloom Unit,” signalling that a grocery store under Giant Co.'s Heirloom brand of smaller-format shops may be lined up as a tenant on some part of the building’s first two floors.
Giant was known to have been considering the site for an Heirloom store as recently as late last year, according to a person with knowledge of the chain’s real estate activity.
The deal, if it goes through, would show that at least some retailers remain confident that Center City’s apartments will stay full and workers will return to their offices once the coronavirus pandemic ebbs, said Catherine Timko, chief executive of the Riddle Co., a retail and planning consultancy.
“The grocers are looking a year and a half out,” she said. “We’re not going to be in this lockdown forever.”
PREIT currently owns only the bottom two floors of the 13-story building, which connects to the company’s Fashion District Philadelphia shopping mall — formerly the Gallery at Market East — to the immediate west.
Other properties in the region owned by PREIT include Exton Square in Chester County; Willow Grove Park and the Plymouth Meeting Mall in Montgomery County; and the Cherry Hill Mall, Moorestown Mall, and Cumberland Mall in South Jersey.
It was not immediately clear how much of the PREIT-owned section of the former Strawbridge’s building would be sold to the Alterra-linked firm in the proposed deal.
Soon-to-close luxury retail discounter Century 21 occupies the 1930s building’s second floor, but most of its ground floor has long been vacant.
The structure’s top 11 floors are now offices owned by Cohen Equities and Taconic Capital, both of New York, with tenants that include The Inquirer, as well as local offices of the U.S. Department of Health and Human Services and the state Department of Labor and Industry.
PREIT vice president Heather Crowell and Alterra managing partner Leo Addimando declined to comment on the filings.
Giant spokesperson Ashley Flower said the company does “not have a signed lease at this location, so we are unable to share additional details at this time.”
PREIT filed a Chapter 11 petition in Delaware early this month to pursue a prepackaged restructuring plan that it said was supported by most of its creditors.
The proposed deal would free as much as $150 million in new borrowing while giving PREIT more time to pay back its existing loans.
In exchange, properties that it now owns free and clear would become collateral for its $919 million in currently unsecured debt, meaning that PREIT’s lenders could foreclose on those properties if it defaulted.
Before filing for bankruptcy, PREIT had announced a campaign of property sales aimed at shoring up its troubled finances, but had not said its Center City holdings would be part of those efforts.
PREIT and other mall landlords had been fighting an uphill battle for retail-market share with e-commerce sites such as Amazon when the coronavirus hit, devastating their already suffering businesses. All PREIT’s properties were ordered closed in March to help stem the coronavirus and did not finish reopening until July.
The section of the former Strawbridge’s building is one of 16 properties that PREIT aims to sell between the start of 2021 and mid-2023 for a projected $135 million, according to the bankruptcy court filing.
Other moves include selling property at its Exton Square and Plymouth Meeting malls to a unit of residential developer Hanover Co. of Houston; selling a section of Willow Grove Park to Plymouth Meeting-based real estate investor Bel Canto Asset Growth Fund LLC; and selling parts of its Moorestown Mall to units of Cleveland, Ohio-based NRP Group and the Briad Group of Livingston, N.J.