Regency sells 7 shopping centers to Blackstone: DDR JV

NEW YORK Tue Aug 13, 2013 6:34pm EDT

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NEW YORK (Reuters) - Regency Centers Corp (REG.N) said on Tuesday that it had sold a portfolio of seven grocery-anchored shopping centers to a joint venture between Blackstone Group LP (BX.N) and real estate investment trust DDR Corp (DDR.N) for $332 million.

The properties, which will be managed by DDR, will not be part of Brixmor Property Group Inc, Blackstone's neighborhood shopping center company which the private equity firm manages. Last month, Brixmor filed for an initial public offering slated for the fourth quarter 2013.

Blackstone, one of the world's largest owners of commercial real estate, recently announced IPO plans for some of its property companies, including Brixmor and Extended Stay America Inc hotels. It also is exploring the sale or IPO of La Quinta Inns & Suites and has hired bankers to explore an IPO for Hilton Worldwide Inc.

Meanwhile, Blackstone is actively acquiring properties. The private equity firm is buying 26,000 apartment units from General Electric's financing arm for $2.3 billion, a source familiar with the deal said.

Under the deal with Regency, the joint venture will assume $207 million of debt and place $28 million of new mortgage debt on the properties, DDR said. DDR will issue $30 million of preferred equity. Blackstone and DDR will split the remaining $70 million payment, with Blackstone picking up 95 percent of it.

Blackstone Real Estate Partners VII, the fund in the deal, will own 95 percent of the joint venture, and DDR will manage the properties.

The joint venture is structured very much like a June 2012 transaction in which Blackstone and DDR bought a portfolio of 46 U.S. shopping centers from Israel's EPN Group for $1.43 billion. That deal also involved a 95 percent stake by Blackstone Real Estate Partners VII and a 5 percent stake by DDR.

In May 2013, the two announced that DDR would buy back the 95 percent stake in 30 of the centers from Blackstone for $1.46 billion. Blackstone retained its 95 percent stake in 14 of those properties.

Similar to that first deal, the new deal allows DDR the option to buy four of the most dominant centers in the portfolio.

The shopping centers are located in Los Angeles, the Washington D.C. area, Northern Virginia, the San Diego area, the Portland, Oregon area and in Harrisburg, Pennsylvania. Two are located in Cincinnati. The shopping centers total 2.3 million square feet including the stores in some centers that may own their own property.

Regency sold the properties on behalf of Regency Retail Partners LP, a fund it manages. Regency has a 20 percent stake in the fund and will realize $38 million of net sales proceeds from the deal.

(Reporting by Ilaina Jonas; Editing by Cynthia Osterman)

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