(For more retail coverage, click GlobeSt.com/RETAIL.)
FARMINGTON HILLS, MI-Ramco-Gershenson Properties Trust and an investor advised by Heitman LLC have formed a joint venture to acquire up to $450 million of core and core-plus community shopping centers in Midwest and Mid-Atlantic states. This agreement, which closed at the end of 2006, follows Ramco's mid-December announcement that it was forming a $1.5-billion joint venture with Canadian firm RioCan Real Estate Investment Trust.
In the $450-million JV, the unnamed investor owns 80%, while Ramco holds the remaining equity interest. Ramco contributed three of its core shopping centers, valued at approximately $125 million, to the agreement. The locally based shopping center REIT is managing both the properties and the JV, which has 24 months to acquire the balance of its program commitment. The leverage on the acquired assets is expected to be 65%, according to Ramco.
Dennis Gershenson, Ramco's president and chief executive officer, tells GlobeSt.com that the JV will target power centers and larger community shopping centers that are within five miles of 150,000 people in the Midwest and Mid-Atlantic regions. He adds that the JV plans to steer clear of Michigan, instead focusing on "stand-alone" markets. Ramco currently owns 33 Michigan centers totaling nearly 6.4 million sf. The REIT owns two properties in Wisconsin, five centers in Ohio, and single properties in Indiana, Maryland, New Jersey and Virginia
Though the JV is focusing on core and core-plus centers, Gershenson expects there will still be plenty of opportunity to add value to the properties. He points to Hunter's Square, a 357,479-sf center at Orchard Lake and 14 Mile roads in Farmington Hills, as an example. Since acquiring the 98% leased property in a joint venture with ING in 2005, Ramco has replaced tenants such as EMS and a local operator with an Ulta Salon and a California Pizza Kitchen. It also divided a 13,000-sf space that was being leased for $22 per sf into four or five new spaces that listed for $35 to $40 per sf. "Our company has a history of creating additional value even in core assets," he says.
The $1.5-billion JV agreement with Toronto-based RioCan is slated to close during the first quarter of 2007. RioCan will own 70% of the venture, while Ramco will hold 30%. Ramco, which will oversee the acquisition, development, redevelopment, management and leasing of the assets, plans to contribute some of its existing centers, totaling $450 million, into the agreement.
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