OAK BROOK, IL-A subsidiary of Inland American Real Estate TrustInc. has formed a joint venture with Centro NP Residual Holding LLCto acquire 25 retail shopping centers. The complicated deal, whichtotals roughly $471 million, involved Centro selling the portfoliointo the JV, which then placed a $310 million CMBS loan on 24properties to complete the acquisition.

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The properties, totaling about 4.5 million square feet, areprimarily grocery-anchored or necessity-based community shoppingcenters. Located in 13 states primarily in the Eastern US, theportfolio had an average occupancy of more than 91% as of September30, 2010. National tenants include: Wal-Mart, Publix, Kroger, BestBuy, Kohl’s, Staples, Bed Bath & Beyond and T.J. Maxx.

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The new JV provides Inland American with a significant equitystake and certain governance rights in the recapitalized portfolio,in addition to a preferred capital position and a preferred return.Michael Podboy, vice president of Inland American Business Manager& Advisor Inc., says Inland owns more than 50% of the JV, butdeclined to disclose exactly how much.

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Podboy tells GlobeSt.com that Inland American began talking withCentro about a JV two months ago. Inland American was familiar withthe portfolio because it had an existing participation on a portionof the prior first mortgage loan encumbering the 25 retail shoppingcenters.

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“We believed that these were quality properties when wepurchased the original loan participation, and this new jointventure agreement reaffirms that we still believe in them,” Podboynotes.

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Specifically, Inland American bought into $141 million of the$424 million loan in 2008. The entire loan, which was scheduled tomature this week, was paid off when the two firms formed theJV.

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“Centro’s issues have been widely reported, and when weinitially purchased the participation, we saw it as an opportunityto be associated with the collateral, which we liked,” Podboyexplains. “When we looked at the loan maturity, there were a numberof options available to Centro including the JV. We decided that ajoint venture would be the best option.”

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Goldman Sachs and J.P. Morgan provided the 10-year CMBSfinancing. “It’s still hard to get a loan of this size from abalance sheet lender, but this deal is emblematic of the fact thatthe CMBS market is coming back, which allows for a more orderlymarket where real estate sponsors can continue to hold on to theirproperties and existing lenders can to be paid off,” Podboy notes.“There will probably be more bonds being floating in the firstquarter than have been floated in a long time.”

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Centro will continue to manage the properties on a daily basis,but the JV provides both Inland American and Centro with majordecision rights, according to Podboy. The deal, which does not havea specific end-date, also allows the partners to exit the dealbefore the CMBS financing matures.

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