REAL ESTATE - Ramco-Gershenson Properties Trust and Heitman have created a JV to invest in retail properties in selected markets across the US.
The total amount of equity in the joint venture is around $159m(€123m). The equity contributions are 80% from Heitman and 20% from Ramco-Gershenson. The ownership positions of any properties in the venture are along the same lines as the equity contributions.
Dennis Gershenson, president of the REIT said: "This venture is a way for us to maximise value to our shareholders by leveraging the fees we get for the acquisition and management of our properties. It also gives a way to diversify our source of capital for deals."
Heitman made its investment in the JV for one of its separate account pension fund clients.
The venture has been seeded with three properties that were previously owned by Ramco-Gershenson. The assets were contributed to the venture for around $125m of debt and equity. These are considered to be core shopping centres, with one is located in the Midwest and the other two are in the Mid-Atlantic region.
There now is another $325m of capital available to invest and the leverage of the venture is around 65%.
The investment strategy for the venture is to buy existing community shopping centers that are either core or core plus assets. Gershenson said, "Core assets are operating properties that are 95% leased in strong locations. Core plus are properties with strong current income, that have the chance for us to add value down the road."
There will be two markets that the JV will be focusing on for deals. One is the Midwest. The other is the Mid-Atlantic area that includes Washington, DC, New Jersey, Delaware and Pennsylvania.
The JV will be seeking transactions that can produce a leveraged IRR in the range of 9 to 10% pa over the venture’s 10-year life. Most of the assets acquired will be in the range of $20mto $50m.