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HOUSTON-Weingarten Realty Investors has formed a joint venture with AEW Capital Management for a $229-million recapitalization of an 18-asset retail portfolio totaling 2.1 million sf. The local REIT plans to invest $214 million in cash into future developments and acquisitions.

According to Richard Summers, vice president and investor relations director for Weingarten, the collateral is 13 grocery-anchored shopping centers, one regional power center and four neighborhood retail centers, all in Texas. The other common denominator is that the centers are positioned in densely populated, infill locations. According to a press release about the JV, Weingarten says the average sales volume of each supermarket exceeds $500 per sf.

“The capital we receive from this joint venture will be used to execute our strategic plans, which includes new developments and acquisitions,” Summers says. “This allows us to grow and expand while we maintain and increase our income.” The joint venture will be leveraged 65%. Weingarten will have a 15% interest and the balance will belong to a client of Boston-based AEW.

Fifteen assets are located in Houston and the remainder in Galveston, San Antonio and Amarillo. The 95%-occupied portfolio contains well-known national credit retailers, including apparel, banks and restaurants. Weingarten will oversee management and leasing of all properties.

Northwestern Mutual Life Insurance Co. of Milwaukee provided financing. New York City-based Eastdil Secured LLC represented Weingarten’s interest in structuring the venture.

“This new joint venture further diversifies our sources of capital while leveraging our operational expertise through the ongoing management and leasing of the properties,” Stanford Alexander, Weingarten’s chairman, says in the press release. “Weingarten Realty will receive more than $214 million in cash proceeds while maintaining a significant ownership stake.”

Philip Martin, managing director with Cantor Fitzgerald & Co.’s Chicago office, says Weingarten’s actions aren’t unusual, especially when it comes to stabilized assets. “If they can redeploy the money more profitably, it makes sense,” he tells GlobeSt.com. “They’re actually looking at other portfolios around the country to do this very same thing.”

Martin, who follows Weingarten on a regular basis, says that REITs and other large asset owners end up forming such joint ventures for the sole purpose of boosting liquidity. The cash is then used for new investments, which is what Weingarten is planning. It also could be used to reduce debt on a balance sheet and improve financial ratios. “If they have a good use for the proceeds, which Weingarten typically does, this isn’t a bad idea,” Martin assesses.

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