The terms, which are consistent with SCII's prior transactions, are for a maturity in three years, with an annual yield payable currently of 13 percent. In addition, SCII will benefit from entry and exit fees on the loan. The loan was made in U.S. dollars and all payments will be made in same, eliminating currency exchange risk for the partnership.

Value Retail, which helped introduce upscale value outlet centers to Europe, operates or has under development eight such properties, including centers near the following major cities: Paris, Milan, Brussels, Madrid, Barcelona, Frankfurt and Munich. The firm was founded more than ten years ago by Scott Malkin, who is based in London.

"Scott's concept of upscale outlet centers, carrying high-fashion brands at discount prices, has won enthusiastic acceptance in Europe," says Anthony Malkin. "Value Retail is the leader in that market segment."

Bicester Village

Bicester Village (pronounced "Bister"), which opened in 1994, has expanded in size three times and currently contains an international roster of 87 outlet shops, including such recognized favorites as Polo Ralph Lauren, Burberry, Escada, Holland & Holland, Diesel, Salvatore Ferragamo and Dockers.

Designed and landscaped in the tradition of rural Oxfordshire, the center is on a well-traveled route leading from London to such popular destinations as Oxford University, the Cotswolds, Stratford-upon-Avon and Blenheim Palace (Winston Churchill's birthplace). Bicester Village is also near the major suburban office and residential center of Milton Keynes, a rapidly growing planned community and home of The Open University, the largest university in the U.K.

Anthony Malkin notes that the investment is in the form of a loan rather than preferred equity because "debt is more suited to the borrower's legal and financial structure. One of Strategic Capital's advantages, from a real estate entrepreneur's point of view, is its ability to accommodate special situations. That's a niche we fill in the capital markets."

Lockwood Deal to Close in July

As reported earlier, SCII's $3.1 million preferred-equity investment in the Lockwood Avenue Medical Office Buildings complex in New Rochelle, N.Y., is scheduled to close in late July. Lockwood, which is 95-percent leased, is near a major teaching hospital and provides office space for doctors and other medical service providers. The investment is projected to generate an annual average yield of approximately 13 percent for the SCII partnership over the investment term, plus entry and exit fees.

The loan to Value Retail and the structured equity investment in Lockwood nearly completes the SCII investment program, with virtually all of the $20.6 million raised by the partnership now invested or committed to structured equity or debt transactions. Wien & Malkin is now reviewing the timing of scheduled repayments of investments made previously in considering whether to move forward with Strategic Capital III.