Amid Slow Investment Market, $1.9B Portfolio Goes on The Block

Given the sluggish property investment market, finding investors for any deal is a challenge these days, let alone for a massive portfolio of 52 properties valued at a total of $1.9 billion. Such is the task faced by the trio of Holliday Fenoglio Fowler L.P., Macquarie Capital Advisers Ltd. and UBS Securities L.L.C., which has been tapped to market the properties, which are owned by Macquarie DDR U.S. Trust, a joint venture involving Australia-based MDT and Developers Diversified Realty Corp. The team will also advise on a strategic review of the REIT’s assets in the U.S.MDT announced last month that the company and partner DDR would reorganize and simplify the ownership of certain interests in the joint venture. The group of 52 shopping centers now up for grabs encompasses 12.5 million square feet in 20 states across the country. The team is marketing the portfolio in a way that presents a few options for potential buyers. Investors have the choice of acquiring MDT’s 85.5 percent interest in the portfolio, the entire portfolio, sub-portfolios or single properties. Presently, the shopping centers are 88.5 percent leased to a variety of tenants, including leading retailers Bed Bath & Beyond, Best Buy, BJ’s Wholesale Club, Dick’s Sporting Goods, Kohl’s, T.J. Maxx and Walmart. Finding buyers for the assets, let alone a single investor for the entire portfolio, could prove to be a challenge given the current economic climate and the credit crunch. Retail, like most sectors of the real estate market, has been suffering. “It’s been difficult,” John Leonard, regional manager with Marcus & Millichap Real Estate Investment Services’ national retail group, told CPN. “We’ve seen a complete slowdown in the sales of anything over $20 million. Transactions over that size have been pretty much non-existent because of the lack of attractive debt. A large portfolio is going to be very difficult to finance today with bank debt. There’s debt out there but LTVs are much lower.” Retail real estate transactions are hardly plentiful these days, but there remains a small percentage of investors that can successfully navigate the frosty credit market or present cash on hand, so a few smaller trades have closed this year. To name a couple, Acadia Realty Trust acquired the 640,000-square-foot Cortlandt Towne Center in Westchester County, N.Y., in January for $78 million, and Cedar Shopping Centers purchased the 260,000-square-foot New London Shopping Center for $40.7 million in February. Pittsburgh-based HFF is not intimidated by market conditions. John Pelusi Jr., executive managing director with the firm, told CPN, “We think the quality of the portfolio will attract buyers.”