Blackstone, DDR buy US retail portfolio for $332m

Through the transaction, Regency Centers will be exiting the remaining investments in its open-ended retail real estate fund.

The Blackstone Group, in partnership with real estate investment trust DDR Corporation, has acquired a portfolio of seven shopping centers from Jacksonville, Florida-based Regency Centers for $332 million. The purchase price includes the assumption of $207 million in existing debt and $28 million of new mortgage debt. 

The assets, which total 2.4 million square feet and are 93 percent leased, include Silver Spring Square in Harrisburg, Pennsylvania; Falcon Ridge Town Center in Los Angeles; Sycamore Crossing in Cincinnati, Ohio; Indian Springs in Cincinnati, Ohio; Fortuna Center in Washington, DC; Orchards Market Center in Portland, Oregon; and Vista Village in San Diego. The partnership also has acquired adjacent development phases that had been wholly-owned by Regency as part of the transaction. 

The deal represents the second joint venture between Blackstone’s latest global real estate opportunity fund, Blackstone Real Estate Partners (BREP) VII, which owns 95 percent of the common equity in the partnership, and DDR. The Beachwood, Ohio-based REIT, which also invested $30 million of preferred equity in the venture at a fixed dividend rate of 9 percent, will manage the properties. Similar to the first partnership, DDR has a right of first offer to acquire four of the new portfolio’s most prominent assets, which contribute more of 80 percent of the total net operating income.

Blackstone, on behalf of BREP VII, and DDR previously teamed to buy a $1.43 billion retail portfolio consisting of 46 US shopping centers from EPN Group in 2012. That partnership also involved the New York-based private equity and real estate firm owning a 95 percent interest in the portfolio, with DDR assuming the remainder. The REIT also issued preferred equity in that deal. Blackstone then went on to sell its ownership stakes in 30 of the properties to DDR for $1.46 billion in May 2013.

The assets acquired through both joint ventures were not part of Blackstone's US retail platform, Brixmor Property Group, which the firm filed to take public last month. Brixmor primarily includes investments where Blackstone owns the assets outright and also where they have control over property manager decisions.

Blackstone's other non-Brixmor retail investments in the US include a 67 percent stake in 40 shopping centers that it jointly owns with Kimco Realty; a 5 percent interest in General Growth Properties; and three shopping malls in Tampa, Florida; Honolulu; and Portland, Oregon. Internationally, the asset manager owns 26 retail assets totaling one billion square meters (10.76 billion square feet) in Europe, half of which was acquired through the firm's takeover of Dutch developer Multi Corporation. Additionally, it holds other mall properties in the UK, Italy and Australia.

Meanwhile, Regency’s sale to Blackstone and DDR marks the liquidation of its Regency Retail Partners, an open-ended shopping center fund that closed in 2010. The REIT owns a 20 percent interest in the fund and received net sales proceeds of approximately $38 million from the transaction.