NEW YORK CITY—Having already agreed to take American RealtyCapital Properties' shopping center portfolio off itshands for $1.98 billion, the Blackstone Group isnow bringing in a partner. The New York City-based private equitygiant and Beachwood, OH-based DDR said Thursdaythey had forged a joint venture to acquire the 76-asset portfolio,with Blackstone owning 95% of the JV's common equity and DDR theremaining 5%.

|

Accordingly, ARCP, also headquartered in New York, said Thursdaythat it had executed on a purchase and sale agreement to the JV,with the all-cash deal expected to close late in the third quarter.The REIT's president, David S. Kay, says the salewill allow the company “to accretively recycle the capital from ourmulti-tenant business into Red Lobster and our single-tenant,self-originated acquisition strategy.”

|

ARCP, which inherited the multi-tenant portfolio as part of itsmerger with Cole Real estate Investments, had considered otheroptions including spinning off the properties into a separate REIT.A few days before announcing the portfolio sale to Blackstone, ARCPacquired more than 500 Red Lobster locations in a $1.5-billion sale-leaseback deal.

|

DDR has partnered with Blackstone on two previous ventures, andwill also invest up to $300 million in preferred equity in this JV,along with managing and lease the portfolio. In addition, DDR willhave the right of first offer to acquire ten of the assets underspecified conditions consistent with past transactions. Followingthe close of the deal, the JV plans to sell of non-prime assetsales within the portfolio.

|

Currently spanning 16.4 million square feet, the portfolioprimarily consists of prime power centers in major marketsincluding Los Angeles, Houston, Denver, Chicago, Atlanta, Phoenixand Washington, DC. Its tenant roster includes WholeFoods, Trader Joe's,Costco, Target,Walmart, Kohl's,PetSmart, Dick's Sporting Goodsand the TJX Cos.

|

It's 95.1% leased, while the average base rent per square footis 6% below DDR's current prime portfolio, thus providing anopportunity for growth. Additionally, the ARCP portfolio containseight vacant junior anchor boxes, over 100 available small shopunits, more than 20 outparcel expansion opportunities and over 30potential candidates for “Project Accelerate,” DDR's recentlyannounced initiative to recapture below-market spaces fromunderperforming retailers.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.