Exit Strategy: Equity One Dumps 36 Shopping Centers for $473M

MIAMI-Equity One has agreed to sell 36 shopping centers spanning about 3.9 million square feet for $473.1 million to Blackstone Real Estate Partners VIII. The assets are encumbered by mortgage loans totaling about $177.4 million.

Lazard Freres & Co. acted as Equity One's financial advisor. Eastdil Secured acted as Blackstone's financial advisor.

Most of the shopping centers are located in Atlanta, Tampa and Orlando, but there are also a few in North Carolina, South Carolina, Alabama, Tennessee and Maryland. The portfolio generated net operating income of approximately $35.4 million for the 12-month period ended June 30, 2011 and is 91% occupied.

"Together with our $600 million purchase of Capital & Counties and other recent acquisitions, this sale significantly advances our strategic plan to concentrate our portfolio in the urban retail markets of New York, Miami, Boston, San Francisco and Los Angeles," Jeff Olson, CEO of Equity One, said in a statement. Equity One intends to use the proceeds from the sale to retire debt, fund its redevelopment pipeline, for future acquisitions and for other corporate purposes.

Anthony Blanco, managing partner at Plaza Advisors, tells GlobeSt.com that this portfolio transaction highlights the continued appetite by investors for grocery-anchored retail centers. Grocery-anchored retail centers, he says, continue to outperform other retail property types around the country.  

"Equity One’s well-publicized plan has been to focus on owning best-of-class shopping centers within major urban retail markets since these assets have generally outperformed secondary and tertiary market properties," Blanco says. "Furthermore, the sale further strengthens Equity One’s balance sheet by removing approximately $177 million in debt that encumbers some of these shopping centers."

As a result of selling the properties, Equity One estimates it will recognize a net impairment loss of between $32 and $36 million in the third quarter of 2011. That figure includes approximately $17 million related to unamortized debt discount costs on mortgages that the buyer is assuming.

"For Blackstone, the portfolio purchase adds to their $9 billion acquisition of Centro Properties Group’s US retail assets in June of this year and clearly signals to the market that Blackstone is in expansion mode," Blanco says. "I fully expect this transaction to be a real win for both groups."