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Shopping Centers Today -> May 2004
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DDR PAYS $2.3B FOR 110 CENTERS
BY IAN RITTER
Developers Diversified Realty’s pending $2.3 billion purchase of 110 open-air centers from Benderson will make it the biggest strip center owner in New York State, analysts say.
The deal, the biggest in DDR’s history, will give it 79 properties in New York, comprising a total 14.1 million square feet. Currently, the company owns just 100,000 square feet of shopping center space in the state.
With the portfolio’s ex-New York properties factored in, the deal involves more than 18.8 million square feet of leasing space and will bring the total number of DDR’s centers to 470 in 44 states.
“It improves the value of our overall franchise,” said DDR Chairman and CEO Scott A. Wolstein.
DDR ranks as the fourth-largest real estate developer in the United States by square footage owned, according to an ICSC Research Department survey published in SCT last November. Benderson was listed at No. 10, though both rankings might have changed slightly since then. The deal, which bears a cap rate of 8 percent, will probably have closed by the time the ICSC Spring Convention rolls around on May 22.
Benderson, based in University Park, Fla., will now be able to focus on its core business, which is development, says Rex Burgher, its senior vice president of development.
“We were becoming more property managers than developers,” he said. “[But] development is what we do best.”
The deal will nevertheless leave Benderson with 23 million square feet of commercial developments, including about 200 retail properties. Its other holdings include residential, industrial, office, storage and hotel space. Benderson also has some 6 million square feet of property under development, including the University Town Center, a 2 million-square-foot power center in Sarasota, Fla., about 60 miles south of Tampa.
The top three tenants in the portfolio are supermarket chain Tops, Wal-Mart and Home Depot. Tops, owned by struggling Dutch company Ahold, has a strong foothold in the region, Wolstein says. “If you’re going to be in the grocery business, Tops in upstate New York is as good as it gets,” he said.
Most of the New York centers are located around the larger upstate cities, such as Albany, Buffalo and Syracuse. Virtually none are in the New York City metropolitan area. The portfolio’s other centers are in Florida, Illinois, Kentucky, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina and Virginia.
DDR says its plans to bring in some joint venture partners on the centers, such as its Australian venture with Macquarie Bank, but it will remain exclusive owner of more than half the portfolio.
DDR and Benderson could do more such deals in the future, according to both firms.
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