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NEW YORK CITY-New Plan Excel Realty has found an Australian partner in Galileo America LLC, a joint venture currently comprised of CBL & Associates and Galileo America Inc. Galileo America is a US REIT wholly owned by Galileo Shopping America Trust, an Australian listed property trust. The partnership will purchase 69 community and neighborhood shopping centers aggregating 10.4 million sf for approximately $968 million.

"We're effectively recycling capital from a joint venture vehicle," said New Plan's CEO Glenn J. Rufrano during a conference call on the sale. "We are also improving our financial flexibility and credit profile." The portfolio, which is scattered across the US, is comprised primarily of stabilized assets. Approximately 44% of the assets have been redeveloped and there's an average occupancy of approximately 96%.

Earlier this year, after Australia's Multiplex said it was no longer engaging in talks about acquiring a $700-million portfolio belonging New Plan, executives at the locally based REIT said they were still "continuing to explore such opportunities." Rufrano said the firm did pursue capital from the US and other countries, but felt comfortable with Australian-based funds. "There is an abundance of equity out there, but the Australian capital market is deep and long-term."

Concurrent to the sale, CBL and Galileo will exchange CBL's equity interest in the partnership for two properties. New Plan will purchase an asset management fee stream from the partnership for $18.5 million of cash. New Plan will also acquire CBL's property management rights with the partnership for $22 million of cash and will purchase additional property management rights in 2008 for nine properties that are currently third-party managed for $7 million. "CBL is focused on its mall business as a long-term goal," Rufrano said. "And they got a damn good price."

Upon completion of the transactions, New Plan will own an approximately 5% equity interest in partnership and have a recurring asset management fee stream through its partnership interest and a minimum 20-year fee stream. "This is a true partnership with Galileo," Rufrano said.

New Plan expects to use a portion of the net proceeds initially to pay down approximately $439 million of additional outstanding indebtedness. In addition, New Plan currently expects to pay a special cash distribution of $3 per common share aggregating approximately $316 million, shortly after the closing, which is expected to take place between August 10 and August 15, New Plan executives said. The transactions were approved by each parties' respective boards. Citigroup Global Markets Inc. and Merrill Lynch & Co. served as financial advisors. Law firm Morrison & Foerster LLP advised CBL. Working on the transaction for Morrison & Foerster were New York partners Yaacov Gross, Jeffrey Temple, Stephen Feldman and associate Thomas McGovern.

Instant Insights /

GlobeSt.com UPDATE: New Plan Sells 10M-SF Portfolio for $968M

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