By Gail Kalinoski, Contributing Editor
The Blackstone Group’s flagship real estate fund and DDR Corp. have closed a $1.4 billion joint-venture retail purchase six months after announcing the plan to purchase the 46-property shopping center portfolio from EPN Group.
The joint venture assumed about $635 million of senior non-recourse debt and originated a $320 million, five-year non-recourse loan facility. DDR Corp., an Ohio-based owner and manager of 469 shopping centers, contributed $17 million of common equity to the deal along with $150 million of preferred equity with a fixed dividend rate of 10 percent. DDR Corp. also assumed a pro rate share of the joint venture debt of $48 million. DDR Corp. is funding its investment with proceeds from the issuance of 19 million common shares.
Blackstone Real Estate Partners VII, a real estate investment fund managed by Blackstone, owns 95 percent of the common equity of the JV and a DDR Corp. affiliate owns the remaining 5 percent. The deal calls for DDR Corp. to continue providing leasing and management services at the 46 open-air power centers and gives the REIT right of first refusal to acquire 10 of the assets.
The properties have a total of 10.6 million square feet and are 90 percent leased to retailers including TJ Maxx, Kohl’s, PetSmart, Dick’s Sporting Goods, Best Buy, Home Depot and Wal-mart. The shopping centers are located across 20 states and serve areas with an average population of more than 300,000 in a seven-mile area and people with average household incomes of about $88,000.
When the deal was announced in January, DDR Corp. president & CEO Daniel Hurwitz told Commercial Property Executive that it gave his firm the ability to retain significant fee income, enhanced current ownership and gave it future access to assets.
New York-based Blackstone has been aggressively active in the retail market for more than a year. In late December, the same Blackstone fund bought a 3.9 million-square-foot shopping center portfolio for $473.1 million from Equity One Inc. The portfolio had 36 properties, most anchored by Publix grocery stores, in seven states. In early 2011, Blackstone acquired the 588-property portfolio from Centro Properties Group for $9.4 billion. In other big deals, Blackstone acquired the Motel 6 chain from Accor SA last month for $1.9 billion, using its recently completed $10 billion real estate fund to finance the deal.