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JACKSONVILLE, FL-The US experiment is nearly over for Macquarie CountryWide Trust, which has agreed to sell a majority of its interest in Macquarie CountryWide-Regency II, LLC, a co-investment partnership with Regency Centers Corp., for approximately $1.3 billion. The trust comprises about 80% of MCW’s U.S. holdings.

The buyer is Global Retail Investors LLC (GRI), a joint venture between the California Public Employees’ Retirement System (CalPERS) and an affiliate of First Washington Realty. Regency, however, can increase its ownership in the fund from its current 25% to 40%.

“This transaction is ‘bittersweet’ given our special relationship with MCW that has developed and grown over many years. At the same time, we are excited to have the opportunity to partner with CalPERS and First Washington,” says Martin E. Stein, Jr., chairman and CEO of Regency Centers, in a statement. “This transaction will have substantial benefits for Regency including a partnership with an outstanding institutional investor, an option to increase our ownership in a high quality portfolio of shopping centers, maintaining the size of the portfolio’s current foot print, and profitable on-going fee income.”

Formed in 2005, MCW II currently owns 86 retail shopping centers that have been valued at $1.73 billion for this transaction, resulting in a 9.1% capitalization rate for the deal. The transaction is being conducted in phases to close over the next 24 months. In 2008, MCW said it would refocus its holdings on its native Australia and New Zealand. The move also eliminates approximately A$1.38 in U.S. CMBS debt.

“In response to deteriorating real estate market fundamentals and the subdued refinancing market conditions expected to persist in the US over the medium-term, a number of options were considered. It was determined that the sale of this particular portfolio would deliver the most substantial strengthening of the balance sheet,” Macquarie CountryWide CEO Steven Sewell said in a statement.

The first phase of the transaction, expected to close by the end of this month, will result in GRI acquiring 45% of the partnership. Phase 2 involves the sale of an additional 15% of the partnership to GRI. This second phase is scheduled to close upon receipt of lender consents for the balance of the property-level loans.

Regency has the option to acquire up to 15% additional interest in the partnership in two different ways: acquiring 10% additional interest in the portfolio from Macquairie CountryWide, or by acquiring a 5% additional interest in the partnership. If Regency chooses not to acquire the 10% portolio interest, GRI may do so or Macquairie can initiate a distribution in kind. If Regency opts not to purchase the 5% partnership interest, GRI must do so.

Assuming Regency exercises all of its options, Regency’s ownership in MCW II will increase to 40% and GRI would own 60% of the partnership. Regency will remain the managing member of the partnership, and retain management and leasing responsibilities.

As of June 30, Regency owned 410 retail properties, including those held in co-investment partnerships.

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