Blackstone and DDR form Joint Venture to Acquire EDT Retail Portfolio for $1.4 Billion
BEACHWOOD, Ohio, Jan. 10, 2012 /PRNewswire/ -- Affiliates of Blackstone (BGX) (NYSE: BX) and DDR Corp. (NYSE: DDR) today announced the formation of a joint venture to acquire a portfolio of 46 shopping centers currently owned by EPN Group ("EPN").
The joint venture has executed a purchase and sale agreement to acquire the majority of the EDT Retail Portfolio in a transaction valued at $1.43 billion, including assumed debt of $640 million and at least $305 million of new financings. Blackstone Real Estate Partners VII, a real estate fund managed by Blackstone on behalf of its investors, will own 95% of the common equity of the joint venture and an affiliate of DDR will own the remaining 5%. DDR will also invest $150 million in preferred equity in the venture with a fixed dividend rate of 10%, and will continue to provide leasing and management services. In addition, DDR will have the right of first offer to acquire ten of the assets under specified conditions.
The 46 shopping centers being acquired by the joint venture are open-air, value-oriented power centers located in 20 states, representing 10.6 million square feet and are currently 90% leased. The top ten tenants by base rent include the TJX companies, Kohl's, PetSmart, Dick's Sporting Goods, Best Buy, Bed Bath & Beyond, JoAnn's, Old Navy, Walmart and Home Depot. More than 94% of the net operating income (NOI) is generated from prime assets, with 50% of such NOI derived from properties in the top 25 MSAs. The portfolio features average household income of approximately $88,000 and average population of over 300,000 people in a seven-mile trade area.
The assets, currently owned by EPN, were previously owned by EDT Retail Trust (the "Trust"), which was originally listed on the Australian Stock Exchange in 2003 as the Macquarie DDR Trust. In 2010, the Trust 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 the assets in the portfolio, with involvement in certain assets dating back to 1995.
"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 B. Hurwitz, president and chief executive officer of DDR. "Moreover, this transaction illustrates our access to off market opportunities while creative structuring enables risk mitigation and non-dilutive deleveraging. Lastly, this transaction enables the retention of significant fee income, and enhances our current ownership and future access to prime assets."
"In addition to DDR's history and performance with these shopping centers over many years, the company's impressive operating platform makes them an outstanding partner for this portfolio," said Nadeem Meghji, Principal in Blackstone's real estate group. "We are very pleased to establish a relationship with DDR and look forward to working with them in a successful venture."
Goldman, Sachs & Co. served as advisor to DDR on the acquisition. Citigroup Global Markets Inc. and Eastdil Secured, a subsidiary of Wells Fargo & Company, served as advisors to Blackstone and JP Morgan served as advisor to EPN.
DDR is an owner and manager of 538 value-oriented shopping centers representing 134 million square feet in 41 states, Puerto Rico and Brazil. The company's assets are concentrated in high barrier-to-entry markets with stable populations and high growth potential and its portfolio is actively managed to create long-term shareholder value. DDR is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol DDR. Additional information about the company is available at www.ddr.com.
DDR Safe Harbor
DDR considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, the ability of the joint venture between the Company and Blackstone to successfully complete the acquisition of the EDT Retail Portfolio, local conditions such as oversupply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a desired yield on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements and the success of our capital recycling strategy. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's Form 10-K for the year ended December 31, 2010. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
SOURCE DDR Corp.