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Kite Realty Group Trust (NYSE:KRG) and Retail Properties of America, Inc. (NYSE:RPAI) have entered into an agreement under which RPAI would merge into a subsidiary of KRG, with KRG continuing as the surviving public company.
A Sweet REIT Deal: The shopping center-focused real estate investment trusts will create a combined company with an equity market capitalization of approximately $4.6 billion and a total enterprise value of approximately $7.5 billion upon the transaction’s closing, assuming a KRG share price of $20.83, the closing price on July 16.
Under the terms of the merger agreement, each RPAI common share will be converted into 0.6230 newly issued KRG common shares in a 100% stock-for-stock transaction. The companies said this represents a 13% premium to RPAI's closing stock price on July 16.
The combined entity will create an operating portfolio of 185 open-air shopping centers comprised of approximately 32 million square feet of owned gross leasable area, with 70% of the centers having a grocery component.
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The New Leadership: The combined company will retain the Kite Realty Group name and continue to trade as KRG on the NYSE. The company's headquarters will remain in Indianapolis.
The KRG management team of CEO John Kite, President and Chief Operating Officer Thomas McGowan and Chief Financial Officer Heath Fear will lead the combined company, with Kite also serving as chairman of the board of trustees. The number of trustees on KRG's board will be expanded to 13, with four members of the existing RPAI board of directors joining the new board.
“The combination of our firms brings together two high-quality, complementary portfolios,” Kite said in a statement. “The combined company will have durable cash flows, operational upside and external value creation opportunities.”
“After many years of curating both of our portfolios, combining them into one company will allow us to generate the best results for both sets of shareholders over the long term,” added Steven P. Grimes, CEO of RPAI. “Our increased scale will benefit the business both operationally and financially, allowing us to take advantage of reduced cost of capital as well as pursue future value creation opportunities by partnering KRG's development expertise with our embedded development pipeline.”
KRG, RPAI Price Action: KRG shares were down 9.07% at $18.94 at last check Monday, while RPAI shares were up 0.61% at $11.59.
Photo: One Loudon Downtown in Ashburn, Virginia, an RPAI property.
