Commercial Real Estate Direct Staff Report

Regency Shopping Centers is selling eight shopping centers with a combined 813,193 square feet for $133.9 million to a venture it formed with USAA Real Estate Co.

Martin Stein, chief executive of the REIT, said the venture could ultimately be expanded to make "several hundred million dollars" worth of deals. In a conference call with analysts last week, he also noted that USAA, of San Antonio, had initially expressed interest in launching a $500 million venture.

Regency, which is headquartered in Jacksonville, Fla., holds a 20 percent stake in the venture and expects to record $104 million of net proceeds from the sale. It will also earn fees for managing the properties and receive incentive distributions if they reach certain performance hurdles.

The venture has completed the purchase of seven of the properties and expects to close on the sale of the remaining property this month. The portfolio consists of grocery store-anchored centers with a combined occupancy of 94 percent in Los Angeles, San Francisco, Houston, Dallas/Fort Worth, Orlando, Fla., Atlanta and Raleigh-Durham, N.C.

The sale price is expected to result in an 8.75 capitalization rate. Stein noted that the price and terms were finalized in the second quarter when investment markets did not have "as much clarity as there is right now."

The properties have 153 tenants. The major ones account for more than half of the portfolio's in-place rents. Those tenants include Kroger Co./Ralphs, Safeway Inc., Publix Super Markets, United States Postal Service, Longs Drugs, Hallmark Gold Crown Stores and Subway Restaurants.

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