BEACHWOOD, OHIO AND NEW YORK — DDR Corp. (NYSE: DDR) and an affiliate of Blackstone Real Estate Partners VII today announced the formation of a third joint venture to acquire 76 shopping centers currently owned by American Realty Capital Properties Inc. (NASDAQ: ARCP).
The joint venture has executed a purchase and sale agreement to acquire the portfolio for nearly $1.98 billion. The transaction includes assumed debt of $461 million and approximately $800 million of new financings.
“We are pleased to once again announce a transaction with our partners at Blackstone, further reinforcing our unique relationship and again highlighting both partners' ability to source and execute efficiently,” says Daniel Hurwitz, CEO of DDR. “We expect to generate outsized asset-level growth by leveraging our operating platform, and have appropriately structured our investment to produce attractive risk-adjusted returns while securing access to acquisition opportunities in the future.”
Blackstone owns 95 percent of the common equity of the joint venture and an affiliate of DDR owns the remaining 5 percent. DDR will also invest up to a maximum of $300 million in preferred equity in the joint venture, and has agreed to provide leasing and management services.
The 16.4 million-square-foot portfolio primarily consists of prime power centers located in Los Angeles, Houston, Denver, Chicago, Atlanta, Phoenix and Washington, D.C.
The portfolio features high-quality retailers such as Whole Foods, Trader Joe's, The Fresh Market, Costco, Target, Walmart, Kohl's, PetSmart, Dick's Sporting Goods, Bed Bath & Beyond, T.J. Maxx and Marshalls. The portfolio is 95.1 percent leased, and the average base rent per square foot is 6 percent below DDR's current prime portfolio, which represents an opportunity for the new ownership to drive future growth.
Additionally, the portfolio contains eight vacant junior anchor boxes, more than 100 available small shop units, more than 20 outparcel expansion opportunities, and more than 30 potential candidates for “Project Accelerate,” DDR’s initiative that entails recapturing below market spaces from underperforming retailers. (You can read more about Project Accelerate in REBusiness Online’s recent Q&A with Joe Tichar, DDR’s senior vice president of corporate operations.)
Goldman, Sachs & Co. and KeyBanc Capital Markets served as advisors to DDR on the transaction. The acquisition is anticipated to close in the third quarter of this year.
DDR is an owner and manager of 396 value-oriented shopping centers representing 108 million square feet in 39 states and Puerto Rico. DDR is a publicly traded real estate investment trust (REIT).
The company’s stock price closed on Wednesday at $17.26 per share, up from trading at $16.90 at this time last year.
— John Nelson