) has agreed to buy 30 of 44 shopping centers from its existing
joint venture (JV) with
The Blackstone Group L.P.
) for $1.46 billion. The deal, which is expected to close in the
fourth quarter of 2013 subject to customary closing conditions,
is projected to substantially enhance DDR's cash flow.
As a matter of fact, the Blackstone - DDR JV currently owns 44
shopping centers. Blackstone has a 95% stake in these properties
while the rest of the stake is held by DDR. Following this deal
via which DDR will acquire Blackstone's 95% common equity
ownership interest in 30 of these shopping centers, 14 properties
will remain under the JV.
The 30 centers in which DDR will gain complete ownership include
Riverdale Village in Minneapolis, Shoppers World in Boston,
Woodfield Village Green in Chicago and Fairfax Towne Center in
The rest of the 14 properties are owned 95% by Blackstone and 5%
by DDR. DDR will carry on managing and leasing these properties
as per the terms of its existing agreements with Blackstone.
DDR plans to pay for the acquisition through the assumption of
$398 million in existing debt, around $150 million from the
repayment of preferred equity and mezzanine loans previously
funded by DDR, as well as proceeds generated from issuance of
common equity and unsecured debt. Under the deal terms, DDR
possesses the right, under specific conditions, to issue common
shares to Blackstone up to $250 million.
A Strategic fit
The deal is a strategic fit for both Blackstone and DDR. For
Blackstone, the deal helps reap decent gains while the addition
of these properties to DDR's wholly owned portfolio is expected
to significantly enhance the company's bottom line going forward.
The portfolio consists of a total of 11.8 million square feet and
is 95% occupied. These properties exhibit solid trade area
demographics with an average household income of $91,000 and
population of 543,000 people, 14% and 21%, respectively, ahead of
the current DDR prime portfolio.
Going forward, DDR has growth opportunities from marking rents to
market (with average base rent of $13.81 per square foot, 5%
below the DDR prime portfolio) as well as add value through
redevelopment and remerchandising projects, tenant downsizing and
DDR currently holds a Zacks Rank #2 (Buy). Two other REIT stocks
that are also performing well and deserve a look include
), both carrying a Zacks Rank #2.
BLACKSTONE GRP (BX): Free Stock Analysis
DDR CORP (DDR): Free Stock Analysis Report
HCP INC (HCP): Free Stock Analysis Report
VENTAS INC (VTR): Free Stock Analysis Report
To read this article on Zacks.com click here.