In recent months there have been several merger and acquisition deals initiated among the neighborhood shopping center REITs.
Shareholders of the oldest REIT in the nation, Bradley Real Estate, Inc., approved a $1.2 billion merger between Bradley and privately held Heritage Property Investment Trust. With the completion of the deal, Heritage is now one of the largest neighborhood and community shopping center owners in the country, with 151 properties in 27 states.
Investors in Heritage include New England Teamsters and Trucking Industry Pension and Prudential Insurance. Bradley owned 96 shopping centers, concentrated in the major metropolitan areas of the Midwest. Major grocery stores anchored the company's 96 centers.
Considering the gap between the perceived value of the company and its share price, Thomas P. D'Arcy, chairman and chief executive officer of Bradley, states that the deal "represents a very favorable transaction for our owners."
Thomas Prendergast, chairman and chief executive officer of Heritage, notes that the deal "provides enormous benefits to our company's long-term strategic direction. In Bradley, not only are we acquiring a high-quality portfolio of properties, but we will also receive the benefit of a very strong corporate infrastructure with talented personnel operating at all levels."
First Washington Realty Trust, Inc., which specializes in supermarket-anchored neighborhood shopping centers in the Mid-Atlantic region and Chicago, has entered into an agreement to sell the company to U.S. Retail Partners, LLC, a joint venture of the California Public Employees' Retirement System (CalPERS) and National Retail Partners, LLC, for a total consideration of appro ximately $800 million to be paid in cash together with the assumption of certain indebtedness.
The sale and plan of liquidation were unanimously adopted by a special committee of independent directors as well as by the full board of directors of First Washington at a special meeting held on September 25, 2000. Completion of the transaction, which is expected to occur in January 2001, is subject to approval by the First Washington stockholders and the partners of the company's operating partnership and the satisfaction of customary closing conditions.
Under the terms of the transaction, First Washington has adopted a plan of liquidation which will be accomplished by the sale of the great majority of the company's assets followed by a merger of the company and its affiliated operating partnership into two CalPERS-related entities. In connection with the transaction, existing stockholders will receive all cash for their stock, and existing operating partnership unit holders (who participate in the company's UPREIT operating partnership) will have the option of receiving their liquidation payment in either cash or a combination of cash and a partnership interest in the newly merged operating partnership entity.
In a separate undertaking, First Washington's two senior officers, Stuart D. Halpert and William J. Wolfe, have agreed to form a new private entity which will provide management, leasing and related services to U.S. Retail Partners, LLC, in connection with the properties to be acquired.
"This portfolio is in the middle of the strike zone for CalPERS' core real estate strategic plan," said Michael Flaherman, chair of CalPERS Investment Committee. "It strengthens our exposure on the East Coast and features high-quality grocery-anchored centers located in strong markets that will provide the opportunity to enhance cash flow and value to our fund."
In another transaction, Pan Pacific Retail Properties, Inc. and Western Properties Trust announced that they have entered into an agreement in which Pan Pacific will acquire Western. With the completion of the transaction, Pan Pacific becomes the largest West Coast neighborhood shopping center real estate investment trust, with total market capitalization of approximately $1.3 billion. Pan Pacific will own and operate 110 neighborhood shopping centers, with a broad geographic representation in West Coast growth markets.
"The transaction will create a unique and powerful platform for growth and increasing shareholder value," stated Stuart Tanz, president and CEO of Pan Pacific. "The Western portfolio provides an exceptional strategic fit and is a perfect complement to our existing geographic locations. The transaction will substantially strengthen our position in high-barrier-to-entry growth markets such as San Francisco, Sacramento and Portland."
Bradley Blake, chairman, president and CEO of Western, comments, "We firmly believe that Pan Pacific will provide Western shareholders the opportunity to realize superior growth and enhanced value as they participate in the benefits of greater size, geographic and tenant diversification, liquidity and market leadership."
