In May, both Federal Realty Investment Trust and Developers Diversified Realty made new deals with joint-venture partners. The transactions are part of a trend among retail REITs to sell stabilized properties into partnerships with pension funds and other institutional investors as a way to free up capital for new acquisitions and development.
Federal added two grocery-anchored shopping centers in the Northeast, each valued at $45.5 million, to its existing venture with Clarion Lion Properties Fund, which is managed by ING Clarion Partners. Federal says it will use the capital for acquisitions.
“We are interested in a lot of markets, including New York, Washington, D.C., Philadelphia, New Jersey, Boston, San Francisco, San Jose, Los Angeles and San Diego,” says Jeff Berkes, vice president and head of acquisitions for Federal Realty.
Meanwhile, Developers Diversified sold six shopping centers located in the southern and midwestern U.S. to its Australian partner Macquarie DDR Trust for $122.7 million.
According to DDR officials, the company decided to add properties to its existing joint venture because the six centers fit Macquarie's acquisition criteria and will give the venture exposure to some new major U.S. markets. Unlike DDR's other joint venture partner, Coventry Real Estate Advisors, Macquarie prefers stabilized assets with high occupancy rates. In addition, the deal has been structured differently from previous transactions, giving DDR a greater share in future growth in exchange for a higher guaranteed return. On the six properties, Macquarie's will reap a nine percent return.