Equity One Makes its California Debut with $600M JV Purchase of C&C USA

May 25, 2010
By Barbra Murray, Contributing Editor

Serramonte Shopping Center

There are few better ways to enhance a commercial real estate portfolio by 2.6 million square feet in one fell swoop than by acquiring a commercial real estate company, and Equity One Inc. has done just that. The North Miami Beach, Fla.-based REIT acquired San Francisco-based Capital and Counties USA Inc. through a $600 million joint venture deal with C&C USA parent company, London-headquartered Capital Shopping Centres Group PLC.

As per the joint venture agreement, Equity One will take on approximately $330 million of mortgage debt, and Capital Shopping Centres will come into possession of 4.1 million shares of Equity one common stock and 10.9 million joint venture units.

By acquiring C&C USA, Equity One will be able to enter the California market by adding five San Francisco Bay Area shopping centers encompassing an aggregate 1.5 million square feet to its portfolio of 180 properties, 170 of which are retail assets. The five retail properties include the 848,000-square-foot Serramonte Shopping Center in Daly City; the 152,200-square-foot Plaza Escuela in Walnut Creek; The Willows Shopping Center, featuring 256,000 square feet in Concord; the 127,900-square-foot shopping center at 222 Sutter Street in San Francisco; and The Marketplace Shopping Center in Cupertino, featuring 113,000 square feet of space. The portfolio’s 83 percent occupancy level will jump to 93 percent with the closing of recent lease agreements and letters of intent. The group of well-anchored shopping centers also offers room for growth, as options for redevelopment and expansion are available at certain properties, including the Serramonte Center, which has ample space for additions on its 81 acres.

The remaining C&C USA portfolio, partially consisting of assets held in joint ventures, includes five office properties totaling approximately 592,000 square feet in Northern and Southern California; two San Francisco-area medical office properties accounting for 218,500 square feet; a 285,000-square-foot residential apartment community in Los Angeles; as well as developable land in Northern and Southern California. These assets, however, are not for long-term hold. Equity One’s corporate strategy centers on the company’s retreat from non-core assets, so the office, medical office, and multifamily properties will ultimately be sold.

For its part, Capital Shopping Centres is relying on the deal to pave the way for the company to focus on its core business in the U.K. The transaction is on track to close in the third quarter of this year.