Kite Realty Group Trust Announces Strategic Merger Agreement with RPAI

Indianapolis-based Kite Realty Group Trust on Monday announced its intention to merge with Oak Brook, Illinois, real estate investment trust Retail Properties of America Inc.

According to a press release, the two companies have entered into a definitive merger agreement under which RPAI would merge with a subsidiary of Kite Realty Group, with Kite remaining the surviving state-owned company. Oak Brook is in the suburbs of Chicago.

The combined company is expected to be worth an estimated $ 7.5 billion after the merger and is expected to be the fifth largest outdoor mall REIT by enterprise value in the United States.

“This merger marks an important day for KRG and our shareholders,” said John A. Kite, Chairman and CEO of Kite Realty Group, in a press release. “The combination of our companies brings together two complementary high quality portfolios. the combined company will have sustainable cash flow, operational growth opportunities and external value creation. “

Kite Realty Group is a full-service Indianapolis-based real estate investment trust.

Kite and Retail Properties of America Inc. expect the merger to have both operational and financial benefits. Kite, the CEO, said the companies expect to realize immediate cash spend synergies of $ 27-29 million.

The transaction would create an operating portfolio of 185 open-air shopping centers comprising approximately 32 million square feet of gross leasable area owned.

These properties are primarily located in the “warmer, cheaper” metropolitan markets of the United States, with 70% of centers per annualized base rent having a grocery component. But the companies also expect the merger to strengthen their presence in Dallas, Atlanta, Houston and Austin while creating a significant presence in other strategic gateway markets such as Washington DC, New York and Seattle.

The combined company will have more diversified business properties. It will have an average base rent of $ 19.29.

“Before Covid, the headlines of the retail apocalypse persisted, despite strong operations. Entering a post-Covid world, one thing is certain, the post-apocalypse narrative of retail was not not justified, ”Kite said on a conference call after the initial announcement of the merger. , adding that consumers have embraced curbside pickup of online retail orders during the economic shutdown from the pandemic.

“In fact, outdoor malls are booming. Demand from tenants and rental value remain strong for both companies. Retail consumers continue to realize the ease and convenience offered by opening shopping malls.

Kite said it became evident during the pandemic that consumers had stepped up their use of physical locations both as online order fulfillment centers and as destinations to receive shipped items.

Retailers, he said, have taken note of the acceleration in demand for real estate owned by both companies.

Under the terms of the agreement, the merger will be 100% share-for-share.

On a pro forma basis, after the closing of the transaction, the shareholders of Kite Realty Group are expected to hold approximately 40% of the equity of the combined company. The shareholders of Retail Properties of America Inc. are expected to own approximately 60%.

“Joining forces with Kite Realty Group is the right long-term decision for our company to continue to create long-term benefits for our shareholders,” said Steven P. Grimes, CEO of Retail Properties of America Inc. “Similar At KRG, we believe that the complementary geographic footprint formed by the combined company will instantly improve the quality of the portfolio and provide additional opportunities to attract major retailers. ”

Kite Realty plans to assume all of the debts of Retail Properties of America and has secured a commitment to finance a $ 1.1 billion term loan in the event that certain consents cannot be obtained before the transaction closes.

Kite Realty plans to assume all of the debts of Retail Properties of America and has secured a commitment to finance a $ 1.1 billion term loan in the event that certain consents cannot be obtained before the transaction closes.

The companies expect the deal to close in the fourth quarter of this year. The transaction is subject to customary closing conditions, including the approval of the shareholders of the KRG and RPAI.

The transaction was unanimously approved by the board of directors of Kite as well as by the board of directors of Retail Properties of America.

Contact IndyStar reporter Alexandria Burris at [email protected] or call 317-617-2690. Follow her on Twitter: @allyburris.

About Sharon Joseph

Check Also

PAR Technology Corporation Announces Pricing of Public Offerings of Common Shares and Convertible Senior Notes

NEW HARTFORD, NY – (COMMERCIAL THREAD) – PAR Technology Corporation (NYSE: PAR) (the “Company” or …

Leave a Reply

Your email address will not be published. Required fields are marked *