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DDR intends to sell its Puerto Rico shopping centers, others

By on December 26, 2017

SAN JUAN – Ohio-based shopping center manager and owner DDR Corp. has announced its plan to spin off 38 stateside assets and its entire Puerto Rico portfolio into a separate, publicly traded real estate investment trust (REIT), Retail Value Trust (RVT).

During a conference call, “executives described Retail Value Trust as a mechanism for holding and selling off riskier properties over a two- to three-year timeframe. If properties don’t sell – and the outlook isn’t clear in hurricane-hit and financially troubled Puerto Rico – then Retail Value Trust will stand on its own. At least initially, though, DDR will manage the new company,” Cleveland.com reported.

DDR’s Plaza Isabela (Screen capture of www.ddr.com)

RVT, which intends to elect to be treated as a REIT for U.S. federal income tax purposes, said in a release it expects to file its initial Form 10 registration statement with the Securities and Exchange Commission in the first quarter of 2018, and the spinoff is expected to be completed during the summer.

DDR said it selected the properties for the portfolio of the remaining company, New DDR, based on “performance and growth characteristics, resulting in the creation of a high-quality, high-growth portfolio located entirely in the Continental U.S.”  

The 12 Puerto Rico and 38 stateside assets have a “combined gross book value of approximately $3 billion as of September 30, 2017,” according to the company’s release.

DDR’s shopping center anchor stores ins Puerto Rico include eight Walmart locations, two Home Depots, a Sam’s Club, and Pueblo and Econo grocery stores.

It’s largest shopping centers are Plaza Del Sol, Plaza Río Hondo and Plaza del Norte.

In an Oct. 4 release, DDR said its local assets were insured “with policy limits of over $350 million for property damage, along with coverage for business interruption. The company’s insurance policies remain subject to various terms and condition including a deductible of approximately $6 million.”

“RVT will be externally managed by DDR for maximum cost efficiency,” the statement reads, adding it will be capitalized with “$1.35 billion of committed mortgage financing to support the transaction” from Credit Suisse, JP Morgan and Wells Fargo expected “in early 2018.”

A presentation regarding the spin-off can be found on the investor part of DDR’s website at http://ir.ddr.com.

The transaction is subject to certain conditions, including the effectiveness of RVT’s Form 10 registration statement and final approval and declaration of the distribution by DDR’s board. The transaction does not require shareholder approval.

Goldman Sachs & Co. is acting as lead financial adviser to DDR. Credit Suisse and Wells Fargo Securities LLC/Eastdil Secured LLC are also serving as financial advisers to DDR. Jones Day is serving as legal counsel to DDR.

The company has 286 “value-oriented” shopping centers in 33 states and Puerto Rico, where it owns the following:

Fajardo, Plaza Fajardo

Guayama, Plaza Walmart

Isabela, Plaza Isabela

San Juan, Plaza Cayey

San Juan, Plaza del Atlántico

San Juan, Plaza del Norte

San Juan, Plaza del Sol

San Juan, Plaza Escorial

San Juan, Plaza Palma Real

San Juan, Plaza Río Hondo

San Juan, Plaza Vega Baja

San Juan, Señorial Plaza

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