Kite Realty Group has inked a deal for a $7.5B merger with Retail Properties of America, which would create a portfolio of 185 open-air shopping centers totaling about 32M SF, much of which is in what KRG calls "warmer and cheaper" markets.
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Going forward, about 40% of the portfolio's annual base rent will be generated by properties in Texas and Florida, and the deal bolsters KRG's presence in Dallas, Atlanta, Houston and Austin, Texas. The enlarged company will also have some presence in the non-Southern markets of Washington, D.C., New York and Seattle.
The deal would boost KRG's total market capitalization to $4.6B and total enterprise value to $7.5B, assuming a KRG share price of $20.83, as it was at the end of Friday.
Beefing up its presence in warmer markets has long been part of KRG's growth strategy.
"With the announcement of the Weingarten/Kimco merger, KRG is now the most compelling way to directly invest in Sun Belt open-air retail real estate," Chairman and CEO John Kite said during the company's most recent earnings call in late April. "We continue to prudently look to expand our exposure to these markets."
The company also focuses on properties with a grocery store anchor. After the deal closes, roughly 70% of KRG's annual base rent will be generated by grocery-anchored retail holdings.
Under the terms of the stock-for-stock deal, which is expected to close in Q4 2021, each RPAI common share will be converted into 0.623 newly issued KRG common shares. That represents a 13% premium to RPAI’s closing stock price on Friday.
A year ago, KRG traded for just under $10 per share, though five years ago, the company was trading for nearly $30 per share. A year ago, RPAI traded for $6.27 per share, and five years ago, it traded for about $17.30 per share.
KRG’s board of trustees will expand to 13, with four members of the existing board of directors of RPAI appointed to KRG’s board. Kite will continue to be chairman of the board of trustees of the combined company, which will remain headquartered in Indianapolis.
