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More Joint Ventures for Retail REITs

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It's been a popular year for joint ventures. Macerich has been the most aggressive about forming joint ventures to shore up its balance sheet. The moves put it in a better position for a common offering, which it recently announced.

In the past couple of days, two other retail REITs have released details of joint ventures. In one deal, shopping center REIT Weingarten Realty Investors is teaming up with German real estate fund manager Jamestown. In the other, Canadian REIT RioCan REIT inked a $181 million pact with Cedar Shopping Centers.

CoStar reported on the Weingarten deal. Let's look at the details.

Houston-based Weingarten Realty Investors (NYSE:WRI) closed on the first phase a joint venture with German real estate fund manager, Jamestown, under which it sold four unencumbered shopping centers to the "Southeast Retail Joint Venture" for $114 million. The Joint Venture is currently in the secured market to leverage these assets and Weingarten anticipates closing the loan before the end of the year.

The second phase of the Joint Venture will include two additional shopping centers that have existing mortgages and will be sold into the joint venture for $46 million once the loan assumptions are complete. Jamestown and Weingarten are targeting 60% leverage on this joint venture, under which Jamestown will own an 80% ownership stake and Weingarten a 20% ownership stake. Weingarten did not specify the assets involved in this joint venture.

The proceeds of the transaction, along with other moves such as selling notes and bonds, have enabled Weingarten to reduce the balance outstanding under its $575 million revolving credit facility to zero. Overall, in 2009, Weingarten has reduced debt maturities through 2011 by $1 billion.

In the other deal, RioCan is acquiring several centers directly from Cedar and also making an equity investment into the REIT. The Globe and Mail has the report.

Under the deals, RioCan will form a joint venture to acquire retail properties to be owned 80 per cent by the Canadian company and 20 per cent by Cedar. The first properties in the joint venture are seven grocery store-anchored shopping centres in Massachusetts, Pennsylvania and Connecticut currently owned by Cedar.

RioCan will also take a 15-per-cent stake in Cedar, with the acquisition of 6.7 million shares and 1.4 million warrants of the U.S. company.

RioCan said it will invest $181-million in the transaction, including a net equity investment of $106-million after assumption of $75-million of property level mortgage debt.

In all, Cedar will pocket approximately $100 million in net proceeds that it will use to reduce balances under its secured revolving credit facility for stabilized properties and secured revolving credit facility for development properties. Concurrent with announcing the RioCan joint venture, Cedar also announced that it has received commitments aggregating more than $220 million from participating lenders in the renewal of its secured revolving credit facility for stabilized properties.

This is not the first time RioCan has attempted to make a foray into the American retail real estate market. In early 2007 it broke off a proposed $1.5 billion joint venture with Ramco-Gershenson Properties Trust.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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