DDR Sponsors $1.5B Fund to Buy Former Inland Assets

June 08, 2007 By Paul Rosta, Senior Associate Editor

In the latest follow-up to its $6.2 billion acquisition of Inland Retail Real Estate Trust Inc., Developers Diversified Realty Corp. is sponsoring a commingled fund that will acquire a shopping center portfolio valued at $1.5 billion.

DDR Domestic Retail fund 1 plans to purchase a 63-center, 8.3 million-square-foot portfolio. The properties are mainly grocery-anchored shopping centers in the 150,000-square-foot range located in the Southeast. "It really is a refinement of our joint-venture business...moving it toward more of a funds-management business," a DDR spokesperson told CPN this afternoon. "We are acting as a fund manager on behalf of our group of investors."

The group of institutional investors will hold an 80 percent interest in the fund and DDR will hold a 20 percent stake. DDR and its partners have committed $539 million in equity. Fifty-two centers were transferred to the fund initially, and another 11 are expected to follow, pending closing and debt assumption. Proceeds from the sale of the fund will go toward retiring debt from the Inland acquisition, the spokesperson said, improving DDR's balance sheet.

Former assets from the Inland portfolio account for 54 of the properties. Seven other centers were formerly owned by a joint venture of DDR and Kuwait Financial Centre, and two were DDR centers in Miami and Atlanta.

When DDR closed the Inland acquisition, it entered into a joint venture with TIAA-CREF, which owns assets valued at $3 billion. DDR is a 15 percent equity stakeholder in that joint venture. This summer DDR expects to dispose of the remaining former Inland assets that it considers non-core, the spokesperson said.

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