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February 8, 2013

Blackstone to Buy UBS’s Majority Stake in 40-Property Retail Portfolio

By Barbra Murray, Contributing Editor

Blackstone Group L.P. is on the verge of snapping up a majority interest in 40 high-quality shopping centers. UBS, which co-owns the collection of U.S. retail properties with Kimco Realty Corp., will sell its controlling interest to Blackstone for $1.1 billion. Kimco disclosed the information during its fourth quarter earnings call on February 6 and Bloomberg was the first to report it the following day.

“During the quarter, Blackstone signed a definitive agreement with UBS Wealth Management North American Property Fund to purchase their equity interest in two large Kimco-managed UBS retail joint ventures, encompassing 40 high-quality shopping centers containing approximately 5.6 million square feet,” David B. Henry, Kimco president and CEO, said during the call.”

Kimco, which owns and operates the largest portfolio of neighborhood and community shopping centers in North America, is also getting a bigger piece of the pie. Per a preliminary agreement with Blackstone, the REIT will boost its ownership stake in the high-quality portfolio from 18 percent to 33 percent.

Additionally, as per the agreement, Kimco will stay on board as manager and leasing services provider for the properties. The REIT is keen on its new partner in the portfolio. “We have a great working relationship with [Blackstone],” Henry said during the call. “As you may remember, they purchased our Valad note, and we did work with them on the original Centro transaction so we have a good working relationship with them.”

A Blackstone spokesperson declined to comment on the deal.

The retail real estate market is a nice business to be in these days. Perhaps it has not caught up to multi-family in terms of being the favorite sector among investors, but it is certainly quite high on the radar. “The retail market clearly has continued to improve on an operating fundamental basis,” David Bujnicki, a spokesperson with Kimco, told Commercial Property Executive, basing his comments on numbers from the fourth quarter results Kimco reported this week. “Kimco and many of the strip-sector peers continue to report increasing occupancy, same-site NOI and leasing spreads, which is driven in part by the fact that there has been no new retail development in the marketplace, with national retailers continuing to look to increase their store counts.”

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