Macquarie DDR Trust has bought a portfolio of community shopping centres in the United States for $US122.7 million.
The purchase is expected to yield a 9.6% preferred return to Macquarie DDR, which will increase the 2007 financial year earnings by 1.7%.
The six community shopping centres are spread across four US states and will provide an additional 82 tenants to MDT’s portfolio from 498 to 546.
The centres are anchored by retailers such as Kohl’s, Bed Bath & Beyond and Best Buy.
The properties were sourced from the trust’s joint venture partner Developers Diversified Realty.
Following the acquisition, MDT will have 78 properties in its portfolio with a total value of $US2.5 billion.
MDT’s chief executive David Dix said the properties are located in markets with strong demographics where average household income and population growth is significantly higher than the national average.
The properties include the Marketplace at Towne Centre Mesquite in Texas, Flat acres Market Centre Parker in Colorado, Turner Hill Marketplace in Georgia, McKinnkey Marketplace in Texas, Overland Pointe Marketplace in Kansas and Frisco Marketplace in Texas.
The average median household income across the six centres is $US70,102.
“The portfolio is projected to provide net operating income growth of 1.6%, while below market rents in the portfolio provide potential opportunities to enhance income growth,” he added.
Macquarie DDR has also improved potential earnings’ stability with the average lease expiry extending to 7.3 years and a lengthened fixed rate debt profile.
The transaction has been majority funded by debt, which increases the trust’s gearing level from 53.5% to 56.2%.
“Reflecting Developers Diversified’s confidence in the performance potential of the assets and strength of the joint venture, Macquarie DDR’s equity contribution of $US33.3 million will receive a priority return while Developers Diversified will receive a performance bonus if the total return of Macquarie DDR’s investment exceeds 9.6%.
“The strength of the joint venture with Developers Diversified has facilitated an attractive acquisition that is expected to increase earnings for investors while enhancing the quality of the trust’s portfolio,” he concluded.
In addition, Macquarie DDR will be added to the Dow Jones Australia LPT Index as at June 19, 2006.
The addition of MDT will bring the number of components in the Dow Jones Australia LPT Index from 16 to 17 including Westfield Group, Stockland, GPT Group, Macquarie Goodman Group, Centro Properties Group, DB RREEF Trust, Mirvac Group Ltd., CFS Retail Property Trust, Investa Property Group, Multiplex Group Ltd., Macquarie Office Trust, Macquarie CountryWide Trust, Commonwealth Property Office Fund, ING Industrial Fund, ING Office Fund, Galileo Shopping America Trust.
The Dow Jones Australia LPT Index tracks the performance of the Listed Property Trust securities traded on the Australian Stock Exchange.
The index represents 90% of the float-adjusted market capitalisation of the Australian LPT investable universe.
By Adam Parsons
