Thursday, July 23, 2009

First Washington Realty, CalPERS buy back portfolio

Wednesday, July 22, 2009, 12:26pm PDT

Sacramento Business Journal

First Washington Realty Inc. and the California Public Employees’ Retirement System have signed a deal to purchase a 60 percent interest in 86 shopping centers valued at $1.73 billion from Australia’s Macquarie CountryWide Trust.

The 11.5 million-square-foot portfolio, which spans 17 states includes 16 properties in the San Francisco, Los Angeles and San Diego areas.

In 2005, Regency Centers, through a joint venture with Macquarie CountryWide Trust, paid $2.74 billion for more than 100 strip centers across the U.S. from a joint venture of First Washington and Sacramento-based CalPERS, the nation's largest pension fund.

In 2001 CalPERS had bought the portfolio from Bethesda, Md.-based First Washington Realty Trust, which kept managing the properties for CalPERS until it traded them to Regency and Macquarie.

Jacksonville, Fla.-based Regency (NYSE: REG) will keep managing the properties and First Washington will provide asset management, buying back debt that Macquarie took on.

Considering the portfolio traded for $2.74 billion in 2005 (with about 15 of those properties unloaded since) and is currently valued at $1.73 billion, the venture bought it back at a major discount. Another sign of that this is a good deal is that the cash flow, or the net operating income generated by the portfolio, remains unchanged.

Regency has an option to increase its current interest in the portfolio from 25 percent to 40 percent. The transaction is expected to close by the end of July.

“We are pleased with the opportunity to once again own this pre-eminent national portfolio of neighborhood and community shopping centers,” William Wolfe, president of First Washington, said in a statement. “It is a portfolio we know well and one which we believe offers the opportunity for highly attractive growth and returns over time.”