Silverado Plaza in Tucson in $1.93 Billion Portfolio Sale to Blackstone-DDR JV
A joint venture formed by Ohio-based DDR Corp. (NYSE: DDR) and an affiliate of the New York Blackstone Group (NYSE:BX) has closed on the acquisition of 71 shopping centers previously owned by American Realty Capital Properties, Inc. (NASDAQ: ARCP) for $1.93 billion. The Arizona assets were multi-tenant properties that were acquired by Cole Real Estate Investments of Phoenix (NYSE:COLE) prior to ARCP’s $11.2 billion acquisition of Cole in February of this year.
Blackstone Real Estate Partners VII, a real estate fund managed by Blackstone Group on behalf of its investors, owns 95% of the common equity of the joint venture and an affiliate of DDR owns the remaining 5%. DDR will provide leasing and management services and has the first right of refusal to acquire 10 of the assets, under certain conditions.
The joint venture assumed approximately $437 million of existing non-recourse debt, which has a weighted average term of 7.1 years and an interest rate of 4.45%. The venture also originated an additional $800 million non-recourse loan from Wells Fargo and CitiGroup Global Markets Realty Corp., which has a five-year term and an interest rate of LIBOR plus 160 basis points.
The high-quality, well-located portfolio of power centers, grocery-anchored neighborhood centers and anchored community centers acquired by the joint venture includes 71 properties totaling approximately 11.3 million-square-feet in 25 states.
Silverado Plaza at 105 S Houghton Road in Tucson was sold for a $12 million ($152 PSF) loan assumption. This 78,749-square-foot Safeway anchored center in southeast Tucson was 99% occupied at time of sale and represented the only ARCP asset in Tucson. Cole had acquired the property in December 2011 for $9.25 million.
The Shops at Prescott Gateway, located at the southwest corner of Highway 69 and Lee Boulevard, adjacent to Prescott Gateway Mall in Prescott sold to the venture for $14.9 million ($430 PSF) for the 34,671-square-feet shopping center. Cole had paid $12.77 million for the center in 2013.
Prime power centers in Los Angeles, Houston, Denver, Chicago, Atlanta, Washington D.C. and Phoenix were the primary retail centers included in the portfolio.
In Phoenix, San Tan Marketplace sold for $66.1 million ($232 PSF) for the 285,511-square-feet within a 690,000-square-feet San Tan Village, a 1.2 million-square-foot regional mall at 2697-2817 S Market Place in Gilbert. The purchase excluded Walmart and Sam’s Club anchors. Plaza at Power Marketplace at 7225 S Power Road in Queen Creek also sold for $13.5 million ($430 PSF) for this 70,973-square-foot plaza
Lisa E. Beeson, President and Chief Operating Officer of ARCP said, “This strategic disposition eliminates approximately $550 million of secured debt, improves our portfolio occupancy and weighted average lease term, reduces capital expenditures and streamlines our property operations. We believe this transaction immediately improves our portfolio and drives long-term value for our shareholders while focusing on our single-tenant, net lease investment strategy.”
This is DDR and Blackstone’s third joint venture together. David J. Oakes, president and chief financial officer of DDR, commented, “We are pleased to once again announce the closing of a transaction with our partners at Blackstone, further highlighting our ability to source high-quality acquisitions in an opportunistic manner. In consultation with our partner, we are in discussions with various counterparties to sell a portion of the portfolio over the near term with the goals of improving the risk-adjusted returns and maximizing portfolio quality for the joint venture.”
David S. Kay, Chief Executive Officer of ARCP had this to say, “With the sale of our multi-tenant properties, we continue to focus on reducing complexity while strengthening the ARCP story as the leading, solely-focused net lease REIT. The disposition to Blackstone and DDR provides approximately $1.34 billion of net proceeds that will be used to reduce leverage by paying down our line of credit as we look towards additional options to further term-out our debt.”
Chris Milkie of DDR is handling the leasing of the four Arizona properties. Milkie can be contacted at 602.343.7504.