Blackstone Joins DDR to Buy Shopping Centers for $1.43 Billion
January 11, 2012, 7:38 PM ESTBy Hui-yong Yu
Jan. 11 (Bloomberg) -- Blackstone Group LP and DDR Corp. agreed to purchase 46 U.S. shopping centers from an affiliate of Israel’s Elbit Imaging Ltd. for $1.43 billion amid an improvement in retail leasing.
Blackstone Real Estate Partners VII, a fund managed by the New York-based private-equity firm, will own 95 percent of a venture formed to buy the properties, with the rest owned by an affiliate of DDR, a Beachwood, Ohio-based real estate investment trust, according to a statement yesterday.
The retail centers are being sold by EPN Group, an affiliate of Tel Aviv-based Elbit. The purchase price includes assumed debt of $640 million and at least $305 million of new financing, according to the statement. DDR also will invest $150 million in preferred equity in the venture and provide leasing and management services.
U.S. shopping centers had their first net gain in occupied space in four years in the fourth quarter as consumer confidence and job growth began to strengthen, Reis Inc. said earlier this week. Landlords have struggled since the recession that ended in 2009 after weak sales drove more than a dozen retailers to file for bankruptcy protection and online stores captured more sales.
The properties that Blackstone and DDR are buying have 10.6 million square feet (984,800 square meters) of space and are 90 percent leased, according to yesterday’s statement. The 10 largest tenants by base rent at the centers, located in 20 states, include TJX Cos., Kohl’s Corp. and PetSmart Inc.
DDR will have the right to make the first offer to acquire 10 of the properties under certain conditions, which it didn’t specify. The company owns stakes in and manages 538 discount shopping centers with 134 million square feet of space in 41 states, Puerto Rico and Brazil.
‘Future Access’
“This transaction enables the retention of significant fee income and enhances our current ownership and future access to prime assets,” Daniel B. Hurwitz, DDR’s president and chief executive officer, said in the statement.
For Blackstone, the acquisition is the latest in a series of retail-property purchases. The firm agreed last year to buy 585 U.S. shopping centers from Australia’s Centro Properties Group for about $9.2 billion. In December, Blackstone bought 36 shopping centers, mainly in Atlanta and in Tampa and Orlando, Florida, for $473 million from Equity One Inc. Blackstone invested $500 million in General Growth Properties Inc. in 2010 as part of the mall owner’s emergence from bankruptcy.
A dearth of retail construction has kept vacancies from increasing for most of the past two years, according to Reis. About 4.9 million square feet of new shopping center space was completed last year, compared with 4.5 million finished in 2010, which was the lowest figure in Reis’s 31 years of data.
--Editors: Daniel Taub, Christine Maurus
To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net
To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net
