New York Stock Exchange listed company Kimco Realty Corporation and Pan Pacific Retail Properties have entered into a definitive merger agreement worth $US4 billion.
Pan Pacific Retail Properties is an equity real estate investment trust and is the largest neighbourhood shopping center REIT focused exclusively on the West Coast.
Pan Pacific’s portfolio includes 138 neighbourhood shopping centres encompassing 22.6 million sq ft of space, diversified across five distinct regions in the West Coast, including Northern California, Southern California, Washington, Oregon, and Nevada.
Meanwhile, Kimco currently owns and operates the US’s largest portfolio of neighbourhood and community shopping centres with interests in 1,117 properties totalling 143.2 million sq ft of leasable space located throughout 45 states in the US, Canada, Mexico and Puerto Rico.
Following the acquisition, Kimco will have interests in 1255 properties totalling 165.8 sq ft of leasable space.
The transaction has a total value of approximately $US4.0 billion, including Pan Pacific’s outstanding debt totalling approximately $US1.1 billion and approximately $US2.9 billion in equity value.
Under the terms of the agreement, Kimco will acquire all of the outstanding shares of Pan Pacific for a total merger consideration of $US70.00 per share in cash.
Kimco has received financing commitments totalling up to $US3.0 billion, which it may use to fund all or a portion of the total merger consideration.
Kimco’s chairman and chief executive Milton Cooper said the merger fits well the group’s strategy of owning shopping centers and in growing the management business.
The merger has been unanimously approved by both companies’ board of directors.
“We believe that this offer by the nation’s largest publicly-traded owner of shopping centers is in the best interest of our stakeholders and represents an attractive price that fairly reflects the value of Pan Pacific,” Pan Pacific’s chief executive Stuart Tanz.
The transaction is expected to close during the fourth quarter of 2006. The merger is subject to customary closing conditions, including approval by the Pan Pacific stockholders.
US property analyst said despite the retail sector recording total returns of 6.4% in the first half of 2006, moves by Centro and Kimco to buyout rival Heritage Property Investment Trust and Pan Pacific respectively, reflect the appetite REITs have for high quality shopping centre assets.
Last month at Macquarie Real Estate Market Outlook’s panel discussion, Macquarie CountryWide Trust’s chief executive Kylie Rampa said diversifying offshore to the United States was a good move.
“Looking back, I wish we had bought more properties,” Rampa said.
She added that intensified competition between institutions, private equity firms and REITs for property assets have driven up prices.
According to DB Real Estate Research, retail property sales totalled $US44 billion in 2005, an increase of 10% over 2004.
By Adam Parsons
