DDR Corp. agreed to buy Blackstone Group LP’s stake in a group of U.S. shopping centers operated under a joint venture between the companies for $1.46 billion.
DDR will acquire Blackstone’s interest in 30 of the 44 shopping centers in the venture, the Beachwood, Ohio-based real estate investment trust said today in a statement. New York-based Blackstone has a 95 percent stake in the properties.
“The acquisition will be funded responsibly, and will position us well for strong relative growth in cash flow generated by high-quality shopping centers over the long term,” David Oakes, DDR’s chief financial officer, said in the statement.
Shopping-center rents and occupancies are climbing as the economy grows. The properties in the acquisition, including Fairfax Towne Center in Washington and Shoppers World in Boston, are prime centers located in the U.S.’s top 40 metropolitan areas, DDR said. For Blackstone, the sale will allow it to realize a profit and return money to investors in its $13.3 billion Blackstone Real Estate Partners VII fund.
The two companies announced the partnership in January 2012 to buy 46 shopping centers from a unit of Elbit Imaging Ltd. The deal was completed in June, DDR said in a statement at the time.
DDR plans to fund the acquisition through the assumption of $398 million in existing debt, almost $150 million from the repayment of preferred equity and mezzanine loans, and from the issuance of equity and unsecured debt. DDR also has the right, subject to certain conditions, to issue common shares to Blackstone in an amount of as much as $250 million.
The average base rent of properties in the portfolio is $13.81 a square foot. The centers are 95 percent leased, DDR said. Retailers at the properties include Bed Bath & Beyond Inc., Dick’s Sporting Goods Inc. and PetSmart Inc.
The 14 properties DDR isn’t buying will remain in the venture. DDR will continue to handle management and leasing of those centers.
Peter Rose, a spokesman for Blackstone, declined to comment on the transaction.