SKOKIE, ILL. — Skokie-based EPN Group has entered into an agreement to sell 47 shopping centers in the United States to a joint venture between Blackstone Real Estate Partners VII (NYSE: BX) and DDR Corp. (NYSE: DDR) for $1.43 billion. The agreement includes the assumed debt of $640 million and at least $305 million of new financings.
Blackstone Real Estate Partners VII will own 95 percent of the common equity of the joint venture and an affiliate of DDR will own the remaining 5 percent. Additionally, DDR will invest $150 million in preferred equity in the venture with a fixed dividend rate of 10 percent, and will continue to provide leasing and management services. DDR will have the right of first offer to acquire 10 of the properties.
“We are very pleased to establish a partnership with Blackstone, one of the most successful and respected real estate investors in the world,” said Daniel Hurwitz, president and CEO of DDR, in a prepared statement.
“Moreover, this transaction illustrates our access to off-market opportunities while creative structuring enables risk mitigation and non-dilutive deleveraging,” Hurwitz continued. “Lastly, this transaction enables the retention of significant fee income, and enhances our current ownership and future access to prime assets.”
The shopping centers are open-air, value-oriented power centers located in 20 states, totaling 10.6 million square feet. The assets are currently 90 percent leased. The top tenants by base rent include TJX Cos. (T.J. Maxx, Marshalls, HomeGoods), Kohl’s, PetSmart, Dick’s Sporting Goods, Best Buy, Bed Bath & Beyond, JoAnn’s, Old Navy, Walmart and The Home Depot.
EPN Group will retain two properties in the United States, valued at approximately $43 million, with total non-recourse secured debt of $14 million.
EDT Retail Trust previously owned the assets, and in 2010 the company undertook a recapitalization in which EPN acquired a majority stake and became the joint manager along with DDR. In 2011, EPN purchased the remainder of the units and privatized the trust, at which point it became a wholly owned subsidiary. Since the inception of the trust, DDR has leased and managed all of the assets in the portfolio, with involvement in certain assets dating back to 1995.
“The transaction positions EPN and its team well for the next business stage,” said Alex Berman, EPN Group’s co-founder and CEO, in a prepared statement. “EPN Group sees further exciting investment opportunities and intends to continue raising funds. We look forward to building up on our knowledge and experience, expanding the EPN Group platform, and pursuing new real estate investments on behalf of its existing and future investors.”
The transaction is anticipated to close in June 2012, following completion of a limited due diligence investigation by the buyer to be completed by the end of January 2012, approval of the applicable lenders to the assignment and assumption of the assumed debt, and satisfaction of certain other closing conditions.
Goldman, Sachs & Co. advised DDR on the acquisition, Citigroup Global Markets and Eastdil Secured, a subsidiary of Wells Fargo & Co., advised Blackstone, and JP Morgan advised EPN.
Blackstone’s share price closed at $15.59 on Jan. 12, up from $14.60 a year earlier. DDR’s share price closed at $13.07 on Jan. 12, up from $12.94 a year earlier.
— Savannah Duncan