Developers Diversified Realty Corporation Announces Completion of Sonae Sierra Brasil's Initial Public Offering

Strategic Insights -

Developers Diversified Realty Corporation, a leading real estate investment trust, has announced the completion of its joint venture Sonae Sierra Brasil's initial public offering (IPO) on the Sao Paulo Stock Exchange. The IPO was a significant milestone for the company, allowing Sonae Sierra Brasil to raise R$434.8 million (approximately US$261 million) through the sale of 21,739,130 common shares at R$20.00 per share. The funds raised will be used to develop new retail centers, redevelop and expand existing assets in Brazil, and repay a loan from Sonae Sierra Brasil's parent company. This transaction is a strategic move by Developers Diversified to reduce leverage, improve liquidity, and participate in the growth opportunities in the emerging market.

Key Takeaways:

  • Sonae Sierra Brasil completed an IPO on the Sao Paulo Stock Exchange, raising R$434.8 million (approximately US$261 million).
  • The IPO consisted of 21,739,130 common shares priced at R$20.00 per share (US$12.00).
  • The funds raised will be used primarily for development of new Prime retail centers and the redevelopment of existing assets in Brazil.
  • A portion of the gross proceeds will be used to repay a loan from Sonae Sierra Brasil's parent company of approximately 31.6 million euros (approximately US$43 million).
  • The underwriters have a 30-day option to purchase up to an additional 2,173,913 common shares to cover over-allotments.
  • Developers Diversified's effective ownership interest in Sonae Sierra Brasil is reduced to approximately 34% from 48%, prior to giving effect to any purchase of additional common shares by the underwriters.
  • The transaction is consistent with Developers Diversified's strategic goal of operating with less risk, specifically lowering leverage and improving liquidity.
  • Daniel B. Hurwitz, president and chief executive officer of Developers Diversified, stated, "We are pleased that Sonae Sierra Brasil completed this offering, which provides important growth capital to our joint venture, without requiring additional leverage and without requiring Developers Diversified to export additional equity."

Statistics:

  • 21,739,130 common shares were issued in the IPO.
  • R$434.8 million (approximately US$261 million) was raised from the IPO.
  • R$1.498 billion (US$900 million) is the market capitalization of Sonae Sierra Brasil based on the IPO price.
  • 31.6 million euros (approximately US$43 million) is the approximate value of the loan from Sonae Sierra Brasil's parent company.
  • 50% of the loan repayment will be paid to Developers Diversified.
  • 570 retail operating and development properties are owned and managed by Developers Diversified in 41 states, Brazil, Canada, and Puerto Rico.
  • Totaling approximately 132 million square feet, Developers Diversified' shopping center portfolio features open-air, value-oriented neighborhood and community centers, mixed-use centers, and lifestyle centers.

Sources:

  • PRNewswire
  • Developers Diversified Realty Corporation press release, February 2, 2011