The real estate investment trust (REIT),
) - through a joint venture formed with an affiliate of
The Blackstone Group L.P.
) - completed the acquisition of a portfolio comprising 7 prime
shopping centers for $332 million.
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Spanning 2.4 million square feet, the assets bought from
Regency Centers Corp
) are located in supply constrained MSA's (Metropolitan
Statistical Areas) such as Los Angeles, San Diego, Washington DC,
Portland, and Cincinnati. These shopping centers are occupied by
high-quality retailers like
), Wal-Mart Stores Inc
and several others and are currently 93% leased.
These properties offer substantial value to the company's
portfolio with favorable trade area demographics (average
household income of about $75,000 and population of more than
310,000 people). The purchase price includes assumed debt of $207
million as well as $28 million of new mortgage debt.
Notably, in the JV, Blackstone owns 95% of its common equity
while an affiliate of DDR owns the rest 5%. In this JV, DDR
possesses several governance arrangements that would permit it to
potentially buy 4 assets, which are the most dominant ones in the
portfolio. Around $30 million of investments in preferred equity
in the venture is made by DDR. Also, leasing and management
services will be provided by DDR.
Recently, DDR reported second-quarter 2013 operating FFO (funds
from operations) per share of 27 cents, in line with the Zacks
Consensus Estimate and up 8% from 25 cents reported in the
year-ago quarter. The year-over-year increase was mainly aided by
organic growth and investments in shopping center acquisitions,
partly dwarfed by asset sales.
Going forward, we believe that the addition of upscale assets to
its high-end asset portfolio along with strengthening of the
tenant base promises strong growth prospects for DDR.
DDR currently holds a Zacks Rank #3 (Hold).
FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.