Kite Realty Group Trust and Retail Properties of America, Inc. Announce $7.5 Billion Strategic Merger
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. Based on the closing share price for KRG on
The merger will create an operating portfolio of 185 open-air shopping centers comprised of approximately 32 million square feet of owned gross leasable area. These properties are primarily located in "Warmer and Cheaper" metro markets in
"This merger marks a momentous day for KRG and our shareholders," said
"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," said
Summary of Strategic Benefits
The merger of KRG and RPAI is expected to create a number of operational and financial benefits, including:
- Positive Financial Impacts and Immediate Accretion
- Provides immediate accretion to earnings per share upon realizing cash expense synergies of
$27- $29 million
- Larger scale will reduce cost of capital, thereby driving higher net income to shareholders.
- Significantly increases shareholder liquidity allowing larger investor base to hold more meaningful positions in the combined entity.
- Enhances Portfolio Quality and Diversification
- Retail ABR per square foot of
- Broader mix of open-air retail types allowing for deeper and more diverse tenant relationships.
- 70% of ABR is located in centers with a grocery component.
- Diverse combined tenant base with no single tenant representing more than 2.4% of total ABR.
- Significant Presence in Strategic Markets
- Maintains sector-leading exposure to Warmer and Cheaper markets.
- Substantial portfolio concentration, with approximately 40% of ABR in growth states of
- Bolsters presence in
Dallas, Atlanta, Houstonand Austin.
- Meaningful presence in other strategic gateway markets such as
Washington, D.C., New York, and Seattle.
- Generates Significant Value Creation Opportunities
- Presents near-term, organic growth opportunities through lease-up of vacancies caused by the pandemic.
- Active development and redevelopment projects expected to deliver additional Net Operating Income.
- KRG's extensive development expertise in a variety of property types provides additional potential value creation for both active and future development projects.
- Appropriately sized and measured development pipeline will offer potential additional value creation opportunities.
- Strengthens Balance Sheet
- Combined balance sheet poised to capture future growth opportunities.
- Net debt plus preferred to EBITDA ratio anticipated to be 6.0x inclusive of expected G&A synergies.
- No material debt maturities until 2023, with an appropriate maturity ladder going forward.
- Creates a Top 5 Shopping Center REIT
- Combined company will have an estimated
$7.5 billiontotal enterprise value upon the closing of the transaction assuming a KRG share price of $20.83, which was the closing price on July 16, 2021.
- Combination of operating best practices expected to drive Net Operating Income improvements.
- Deepens tenant relationships and increased optionality to a broader mix of open-air retail formats.
The combined company will continue to be operated at the high standards previously established at both KRG and RPAI. The number of trustees on KRG's board will be expanded to thirteen with four members of the existing Board of Directors of RPAI to be appointed to KRG's board.
The KRG management team will lead the combined company, with
Upon completion of the merger, the company's headquarters will remain in
KRG intends to maintain its current dividend policy post-closing. Given the current dividend levels and conversion ratio, RPAI shareholders will experience a dividend increase of approximately 50% from current levels (based on current annualized distribution amount).
The timing of the pre-closing dividends of KRG and RPAI will be coordinated such that, if one set of shareholders receives their dividend for a particular quarter prior to the closing of the merger, the other set of shareholders will also receive their dividend for such quarter prior to the closing of the merger.
The companies will conduct a joint conference call to discuss the merger transaction on
Forward Looking Statements
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the proposed transaction between KRG and RPAI, including statements regarding the anticipated benefits of the transaction, the anticipated timing of the transaction and the markets of each company. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result" and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties.
Currently, one of the most significant factors that could cause actual future events and results of KRG, RPAI and the combined company to differ materially from the forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus ("COVID-19 pandemic"), including possible resurgences and mutations, on the financial condition, results of operations, cash flows and performance of KRG and RPAI and their tenants, the real estate market and the global economy and financial markets. The effects of the COVID-19 pandemic have caused and may continue to cause many of KRG's and RPAI's tenants to close stores, reduce hours or significantly limit service, making it difficult for them to meet their obligations, and therefore has and will continue to impact KRG and RPAI significantly for the foreseeable future.
Many additional factors could cause actual future events and results to differ materially from the forwardlooking statements, including but not limited to: (i) the possibility that KRG shareholders and/or RPAI stockholders do not approve the proposed transaction or that other conditions to the closing of the proposed transaction are not satisfied or waived at all or on the anticipated timeline; (ii) failure to realize the anticipated benefits of the proposed transaction, including as a result of delay in completing the proposed transaction; (iii) the risk that RPAI's business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; (iv) unexpected costs or liabilities relating to the proposed transaction; (v) potential litigation relating to the proposed transaction that could be instituted against KRG or RPAI or their respective trustees, directors or officers and the resulting expense or delay; (vi) the risk that disruptions caused by or relating to the proposed transaction will harm KRG's or RPAI's business, including current plans and operations; (vii) the ability of KRG or RPAI to retain and hire key personnel; (viii) potential adverse reactions by tenants or other business partners or changes to business relationships, including joint ventures, resulting from the announcement or completion of the proposed transaction; (ix) risks relating to the market value of the KRG common shares to be issued in the proposed transaction; (x) risks associated with third party contracts containing consent and/or other provisions that may be triggered by the proposed transaction; (xi) the impact of public health crises, such as pandemics (including the COVID-19 pandemic) and epidemics and any related company or government policies and actions intended to protect the health and safety of individuals or government policies or actions intended to maintain the functioning of national or global economies and markets; (xii) general economic and market developments and conditions; (xiii) restrictions during the pendency of the proposed transaction or 6 thereafter that may impact KRG's or RPAI's ability to pursue certain business opportunities or strategic transactions; (xiv) either company's ability to maintain its status as a real estate investment trust for
Additional Information about the Proposed Transaction and Where to Find It
This communication relates to a proposed transaction between KRG and RPAI. In connection with the proposed transaction, KRG will file a registration statement on Form S-4 with the
Investors, KRG shareholders and RPAI stockholders may obtain free copies of the joint proxy statement/prospectus (when available) and other documents that are filed or will be filed with the
Participants in the Solicitation
KRG and RPAI and their respective trustees, directors and executive officers may be deemed to be participants in the solicitation of proxies from KRG's shareholders and RPAI's stockholders in connection with the proposed transaction. Information about KRG's trustees and executive officers and their ownership of KRG's common shares and units of limited partnership interest of
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.
RPAI – Investor Contact
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