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Deal Of The Week (2/27)

Developers Diversified Realty (NYSE: DDR), which has been battling concerns about its debt load, received a cash infusion from abroad. German investor Alexander Otto purchased 30 million common shares and warrants entitling the Otto family to purchase an additional 10 million shares. When completed, the share purchase will increase the Otto family’s ownership to 36 million shares--in excess of 20 percent of the common shares outstanding, making the family the company’s largest individual shareholder. An affiliate of the Otto family also has provided the company with a commitment to make a five-year, fixed-rate, secured mortgage loan to the company in the amount of $60 million.

The shares will be purchased in two tranches at a price of $3.50 per share for the first 15 million shares at the first closing and $4.00 per share for the second 15 million shares at the second closing. The Otto family will be entitled to any dividends declared from the date of the purchase agreement. The share purchase prices represent a premium of approximately 33 percent and 52 percent, respectively, to the closing market price of the DDR shares on Friday, February 20, 2009.

The Otto family will also be issued five-year warrants for the purchase of up to 10 million shares at a price of $6.00 per share, reflecting a premium of approximately 128 percent to the closing market price of the DDR's shares on Friday, February 20, 2009. Warrants for 5 million shares will be issued upon each of the two closings.

"The Otto family's business acumen in shopping center development and management, as well as their vast retail holdings, will provide a distinctive synergy as we share our retail real estate expertise," DDR Chairman and CEO Scott Wolstein said in a statement. "This investment provides a unique opportunity for our company to tap into an expanded pool of real estate, retail and financial expertise, and to share best practices on a national and international level."

Alexander Otto and other members of his family are the owners of ECE Projektmanagement of Germany, a leading European firm in developing and managing inner-city shopping centers. ECE manages 111 malls with a total sales area of approximately 37 million square feet and is active in 15 Central and Eastern European countries. In addition, Alexander Otto is the largest shareholder of the German MDAX listed company Deutsche EuroShop AG, which owns 16 shopping centers in Central Europe with an asset value of over $2.0 billion and market capitalization of over $900 million. The Otto family also owns the Paramount Group, one of the largest privately owned real estate firms on the East Coast, and retailer Crate and Barrel.

Other Notable Deals

Phillips Edison & Co.'s Land Development Fund closed a 50/50 joint venture with Pat Madden and Jerry Woodall, two long-time Lexington, Ky. developers, on a 47-acre plot in Frankfort, Ky. known as Parkside Crossing. In 2007, Phillips Edison & Company raised a $70 million equity fund to further its goals in the land development business.… Sperry Van Ness and New England Retail Properties brokered the sale of the 71,493-square-foot Goff Brook Shops in Wethersfield, Conn., from Centro Properties to a Connecticut-based private investor for $6.8 million. Sperry Van Ness represented Centro. New England Retail Properties Inc. represented the buyer.… Wheeler Interests acquired the 56,960-square-foot Port Crossing Shopping Center in Harrisonburg, Va., from Broad Reach Retail Partners, LLC for $7.5 million.… Burnham USA Equities Inc. and affiliate Burnham-Ward Properties have purchased out of receivership the 300,000-square-foot South Coast Home Furnishings Centre in Costa Mesa, Calif. for approximately $35 million. (In 2007, the same property sold for at least $98 million if not more) The center was owned by South Coast Home Furnishing Center LLC prior to the receivership. It was offered for sale through a court-appointed receiver. Grubb & Ellis Co. represented the receiver in the transaction.… Mapali Inc. purchased a 25,635-square-foot shopping center at 4676-4696 Market St. in San Diego from Harol Market Properties Inc. for $4.8 million. Grubb & Ellis|BRE Commercial represented Harol Market. Casa Bonita Realty represented Mapali.

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