Silver Spring Square in Harrisburg, PA, is the biggest of the homes DDR is spinning off.
DDR Corp. (NYSE: DDR), a Cleveland-based shopping mall REIT, prepares to spin off a portfolio of 50 properties, including all its Puerto Rico portfolio, into a different publicly-traded REIT to be named Retail Worth Trust.
The brand-new REIT will work to realize value by running and eventually selling its 38 continental U.S. properties and all 12 of DDR’s Puerto Rico holdings with a combined gross book value of roughly $3 billion as of Sept. 30, 2017. It expects to offer the homes over the next 2 to 3 years.
Retail Worth Trust will be externally managed by DDR.
Retail Value Trust’s Continental U.S. assets are defined by steady capital and measurably higher quality and demographics than the $1 billion of properties DDR got rid of so far in 2017, the business stated.
Included in the portfolio are:
The 343,000-square-foot Silver Spring Square in Harrisburg, PA;
The 342,000-square-foot Gresham Station in Portland, OR;
The 321,000-square-foot Beaver Creek Crossings in Raleigh, NC;
The 175,000-square-foot Seabrook Commons in Boston; and
The 174,000-square-foot Market at Towne Center in Dallas.
“DDR has made massive strides to-date improving portfolio quality through an industry-leading disposition program,” said David Lukes, president and CEO of DDR. “This transaction represents a last, decisive step in our improvement procedure, leading to top-tier demographics and much greater direct exposure to long-term redevelopment chances. We strongly think that offering investors the choice of compelling growth opportunities at New DDR and value awareness at Retail Worth Trust will be accretive to DDR investors.”
DDR’s management group picked the residential or commercial properties to stay with (New DDR) based upon performance and development characteristics, leading to the production of a top quality, high-growth, portfolio situated completely in the Continental U.S. It will hold 236 properties, 70% which will be anchored by food- or grocery-related tenants. The portfolio will have a book worth of about $6.3 billion.
The New DDR anticipates to pursue a strategy of making the most of earnings and net possession value per share growth through launching, redevelopment and opportunistic financial investment.
Retail Value Trust will be capitalized with dedicated home loan financing of $1.35 billion anticipated to fund in early 2018. Profits are expected to be utilized to pay back financial obligation at DDR, positioning New DDR to accomplish the previously mentioned objective of 6.0 x Net Debt/Adjusted EBITDA in 2018.
Retail Worth Trust expects to confidentially submit its preliminary registration declaration with the U.S. Securities and Exchange Commission in the very first quarter of 2018, and the spin-off is expected to be completed during the summertime of 2018.
The spin-off makes mathematics sense if executed correctly, said Richard Hill and Ronald Kamdem, experts with Morgan Stanley & & Co.”We continue to see DDR as having the most upside from self-help capacity in our coverage given a strong management team and the quality of the top 75 properties in the portfolio,” the experts stated. “While we were initially underwhelmed by their $900 million disposition program announcement in 2Q17, we are incrementally more favorable as we view the Retail Value Trust spinoff as the ideal advance to unlocking the value of the U.S. assets with a complimentary call alternative on possessions in Puerto Rico.”
Goldman Sachs & & Co. is acting as lead financial consultant to DDR. Credit Suisse and Wells Fargo Securities/ Eastdil Guaranteed are also serving as monetary advisors to DDR. Credit Suisse, JP Morgan, and Wells Fargo are supplying $1.35 billion of committed home loan funding to support the transaction. Jones Day is serving as legal counsel to DDR.