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CLEVELAND-Locally headquartered Developers Diversified Realty has completed its disposition of of 25 mostly non-retail properties to Brascan Real Estate Opportunity Fund, which is managed by publicly held Brascan Corp. The sale price is comprised of $170 million in cash and a contingent payment of $7 million in subordinated equity, based on the portfolio’s performance, including proceeds from a potential disposition.

The $136.3 million in net proceeds from the transaction were used to pay down DDR’s primary revolving credit facility, which was used to fund DDR’s acquisition of its interest in the Mervyns stores assets, and for general corporate purposes. The $396.2-million joint venture acquisition of 36 Mervyns department stores closed about two weeks ago.

The office and industrial assets DDR sold were first acquired as part of a 2001 deal through a merger with American Industrial Properties. The portfolio consisted of 31 industrial buildings, six office properties, two retail properties and approximately 24 acres of raw land. Since the merger, Developers Diversified sold seven properties and one land parcel with gross proceeds aggregating over $32 million.

This transaction disposes of all remaining industrial and office assets from the American Industrial Properties transaction, except for one property held in a joint venture, one property (comprised of three individual assets) which DDR is precluded to sell by the terms of the issuance of Developers Diversified operating partnership units in connection with the original acquisition, and one very small property located in DDR’s hometown. DDR will continue to own and operate the two retail properties located in Denver, CO and Daytona Beach, FL.

DDR chief executive Scott Wolstein estimates that it earned an unleveraged return of approximately 10% on the transaction, or a leveraged return of approximately 16%. DDR, a retail REIT, currently owns stakes in about 500 centers in 44 states and Puerto Rico.

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