(Ian Ritter is national online editor for GlobeSt.com/RETAIL.)

CLEVELAND-Developers Diversified Realty and its joint-venture entity with Australia-based Macquarie Bank Limited are acquiring 36 Mervyns department stores for $396.2 million. DDR is selling 25 office and industrial properties to a fund operated by Brascan Corp. for $177 million, which will in part fund the Mervyns deal. Company executives expect both transactions to close next month.DDR will own half of the Mervyns stores, to be leased back to the retailer, while the JV, Macquarie DDR Trust, will own the other half. They are buying the stores from a partnership between Capital Partners, Inc., Cerberus Capital Management, LP, and Lubert-Adler and Klaff Partners, which acquired the 257-store Mervyns portfolio from Target Corp. in September for about $1.2 billion.DDR had its pick of the Mervyns units from an offered portfolio, said Scott Wolstein, DDR's chairman and CEO, during a conference call this morning. About 70% of the stores are in open-air centers, while the rest are on enclosed mall sites. Of the 2.7 million sf in the portfolio, about two million sf is in California, and the rest lies in Arizona and Nevada.Wolstein outlined three possibilities for the future of the stores: They will continue operation as Mervyn's stores, they could get bought out by another retailer, or pending the failure of the chain, DDR could redevelop the properties into other retail uses, such as splitting the stores into developments with multiple retailers.The deal carries a capitalization rate. DDR executives expect annual rent of $30.5 million, to increase annually by 2%.In April DDR sold eight centers to its Macquarie JV for $63.8 million, bringing the venture to 35 properties. Macquarie is also in a JV with Jacksonville, FL-based Regency Centers, which earlier this year acquired 100 centers from CalPERS/First Washington for $2.7 billion.The office–industrial assets DDR is selling were first acquired as part of a 2001 deal through a merger with American Industrial Properties. DDR currently owns stakes in about 500 centers in 44 states and Puerto Rico.