By  on August 10, 2009

NRDC Acquisition Corp. is converting into a real estate investment trust with a mission to buy up retail real estate.

The new company, called Retail Opportunity Investments Corp. [ROI], will have about $400 million in cash, enabling it to purchase or invest in up to $1 billion in real estate assets. Neighborhood centers, regional malls, lifestyle centers and power centers will be on ROI’s radar this fall, at a time when some experts believe market values will have bottomed out.The conversion is expected to be completed in mid-to-late October, pending approval by NRDC Acquisition’s stock holders and warrant holders.

NRDC Acquisition was formed in October 2007 as special purpose acquisition corporation, known as a SPAC. According to the rules of the SPAC, management had two years to make an acquisition. Since no deal was ever made, NRDC had to convert or return money to investors.

“We believe that the current market environment presents an extraordinary opportunity to acquire retail properties at compelling yields and at values substantially below their replacement cost, offering us the potential to achieve attractive risk adjusted returns for our stockholders over time primarily through dividends and secondarily through capital appreciation,” Richard A. Baker, chief executive officer of NRDC Acquisition, said. He will become ROI’s executive chairman.

“Our perception is that in the current capital constrained environment, many retail property owners are severely limited in their ability to repay upcoming debt maturities and to deploy capital needed for tenant improvements and other non-recurring capital expenditures, which is restricting their ability to retain existing and attract new tenants,” Baker added.

Stuart Tanz, formerly chairman, ceo and president of Pan Pacific Retail Properties, which was sold to Kimco Realty Corp. at the height of the market in November 2006, will become ROI’s ceo. Tanz said ROI’s emphasis will be on “necessity-based” retail properties, those that house supermarkets, discounters and drug stores. “Our view is that necessity-based retail properties will fare better than other types of retail real estate as consumers will continue to spend on necessity items while cutting back on luxury and other nonessential purchases,” he said.

John B. Roche has agreed to become ROI’s chief financial officer. Roche was executive vice president and cfo of New Plan Excel Realty Trust Inc. from 2000 to 2007.

Board members will include Mark Burton, chief investment officer of real estate at Abu Dhabi Investment Council since 2007; Ron Tysoe, former senior adviser at Perella Weinberg Partners and former vice chairman of Federated Department Stores; William L. Mack, chairman of NRDC Acquisition Corp., and Richard Baker and his father Robert.

ROI is a separate company not associated with National Realty & Development Corp., which has 18 million square feet of owned and leased space and is headed by Robert Baker, chairman and ceo, and Richard Baker, vice chairman. While ROI will be buying and not building properties, NRDC developed most of its property from the ground up.

Richard Baker is also president and ceo of NRDC Equity Partners, the parent of Hudson’s Bay Trading Co.

Under the conversion plan, warrants will be amended to, among other things, an exercise price of $12 a share from $7.50 in exchange for extending the warrant expiration by three years to October 23, 2014. Before the warrants can be redeemed NRDC Acquisition’s common stock must trade at $18.75 (up from the $14.25 previously stipulated), and, for those warrants issued prior to the 2007 initial public offering, the stock has to rise to $22. About 20 percent of the outstanding shares held by NRDC Acquisition’s directors and affiliates that were acquired prior to NRDC Acquisition’s 2007 IPO will be canceled. In addition, NRDC Acquisition has agreed with the IPO underwriters to reduce a portion of the deferred underwriting commissions, originally an aggregate of $14.5 million for rights to participate in future securities offerings.

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