INDIANAPOLIS and CHICAGO,
July 19, 2021 /PRNewswire/
-- Kite Realty Group Trust (NYSE: KRG) and Retail Properties
of America, Inc. (NYSE: RPAI) today announced that they have
entered into a definitive merger agreement under which RPAI would
merge into a subsidiary of KRG, with KRG continuing as the
surviving public company. The strategic transaction joins together
two high-quality portfolios with complementary geographic
footprints creating a top five shopping center REIT by enterprise
value. The combined company is expected to have an equity market
capitalization of approximately $4.6
billion and a total enterprise value of approximately
$7.5 billion upon the closing of the
transaction assuming a KRG share price of $20.83, which was the closing price on
July 16, 2021. This immediately
accretive transaction, paired with a strong balance sheet and
significant value creation opportunities, is expected to provide a
runway to increase longterm value for shareholders.
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 July 16, 2021, this
represents a 13% premium to RPAI's closing stock price on
July 16, 2021. On a pro forma basis,
following the closing of the transaction, KRG shareholders are
expected to own approximately 40% of the combined company's equity
and RPAI shareholders are expected to own approximately 60%. KRG
anticipates assuming all RPAI debt and has obtained a financing
commitment to provide a $1.1 billion
term loan bridge facility in the event certain debt consents cannot
be obtained prior to the closing of the transaction. The parties
expect the transaction to close during the fourth quarter of 2021
subject to customary closing conditions, including the approval of
both KRG and RPAI shareholders. The transaction was unanimously
approved by the Board of Trustees of KRG and the Board of Directors
of RPAI.
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 the United States with 70% of centers by
annualized base rent ("ABR") having a grocery component. The
combined company is expected to benefit from increased scale and
density in strategic markets, deeper tenant relationships given the
broader mix of open-air retail types, an appropriately sized
development pipeline and a strong balance sheet.
"This merger marks a momentous day for KRG and our
shareholders," said John A. Kite,
Chairman and CEO of Kite Realty Group. "The combination of our
firms brings together two high-quality, complementary portfolios.
The combined company will have durable cash flows, operational
upside and external value creation opportunities. The financial
benefits of the transaction include immediate earnings accretion,
while maintaining a strong balance sheet. This merger further
demonstrates our conviction in open-air retail centers as essential
shopping destinations and last mile fulfillment centers. We are
energized about the future of this combined company."
"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
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. We are excited to present this transaction to
our shareholders, who will be the beneficiaries of the near-term
and future benefits of the combined company."
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 $19.29.
- 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 Texas and
Florida.
- Bolsters presence in Dallas,
Atlanta, Houston and 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 billion total 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.
Leadership and Organization
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. John Kite will
continue to serve as Chairman of the Board of Trustees of the
combined company. William Bindley
will continue to serve as Lead Independent Trustee.
The KRG management team will lead the combined company, with
John Kite as Chief Executive
Officer, Thomas McGowan as President
and Chief Operating Officer and Heath
Fear as Chief Financial Officer. The approach to integration
will draw from the best practices of both companies to ensure
continuity for tenants, employees and other stakeholders.
Upon completion of the merger, the company's headquarters will
remain in Indianapolis, Indiana.
The company will retain the Kite Realty Group name and trademarks
and will continue to trade under the NYSE symbol KRG.
Dividend Policy
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.
Advisors
BofA Securities is acting as lead financial
advisor to KRG, with KeyBanc Capital Markets also acting as
financial advisor to KRG. Hogan Lovells US LLP is acting as legal
advisor to KRG. Citigroup Global Markets Inc. is acting as
exclusive financial advisor and Goodwin Procter LLP is acting as
legal advisor to RPAI.
Merger Call
The companies will conduct a joint conference call to discuss
the merger transaction on Monday, July 19,
2021, at 8:00 a.m. Eastern
Time. A live webcast of the conference call will be
available on KRG's corporate website at www.kiterealty.com and
RPAI's corporate website at www.rpai.com. The dial-in numbers are
(844) 309-0605 for domestic callers and (574) 990-9933 for
international callers (Conference ID: 7994881). In addition, a
webcast replay link will be available on both corporate
websites.
About Kite Realty Group
Trust Kite Realty Group Trust is a full-service, vertically
integrated real estate investment trust (REIT) that provides
communities with convenient and beneficial shopping experiences. We
connect consumers to retailers in desirable markets through our
portfolio of neighborhood, community, and lifestyle centers. Using
operational, development, and redevelopment expertise, we
continuously optimize our portfolio to maximize value and return to
our shareholders. For more information, please visit our website at
kiterealty.com.
Connect with KRG: LinkedIn | Twitter | Instagram | Facebook
About Retail Properties of America
Retail Properties of America, Inc. is a REIT that owns and
operates high quality, strategically located openair shopping
centers, including properties with a mixed-use component. As of
March 31, 2021, RPAI owned 102 retail
operating properties in the United
States representing 19.9 million square feet. RPAI is
publicly traded on the New York Stock Exchange under the symbol
RPAI. Additional information about RPAI is available at
www.rpai.com.
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 U.S. federal income tax purposes; and (xv) the occurrence of
any event, change or other circumstances that could give rise to
the termination of the merger agreement relating to the proposed
transaction. The foregoing list of factors is not exhaustive. You
should carefully consider the foregoing factors and the other risks
and uncertainties that affect the businesses of KRG and RPAI
described in the "Risk Factors" section of their respective Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other
documents filed by either of them from time to time with the SEC.
These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Investors are cautioned to interpret many of the risks identified
in the "Risk Factors" section of these filings as being heightened
as a result of the ongoing and numerous adverse impacts of the
COVID-19 pandemic. Forward-looking statements speak only as of the
date they are made. Readers are cautioned not to put undue reliance
on forward-looking statements, and KRG and RPAI assume no
obligation and do not intend to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise. Neither KRG nor RPAI gives any
assurance that either KRG or RPAI will achieve its
expectations.
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 Securities and
Exchange Commission (the "SEC"), which will include a document that
serves as a joint proxy statement/prospectus of KRG and RPAI. A
joint proxy statement/prospectus will be sent to all KRG
shareholders and all RPAI stockholders. Each party also will file
other documents regarding the proposed transaction with the SEC.
BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS
OF KRG AND INVESTORS AND SECURITY HOLDERS OF RPAI ARE URGED TO READ
THE REGISTRATION STATEMENT, JOINT PROXY STATEMENT/PROSPECTUS AND
ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE
SEC IN CONNECTION WITH THE PROPOSED TRANSACTION AS THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION.
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 SEC by KRG or RPAI through the website maintained by the SEC at
www.sec.gov. The documents filed by KRG with the SEC also may be
obtained free of charge at KRG's investor relations website at
http://ir.kiterealty.com/ or upon written request to Investor
Relations, Kite Realty Group Trust, 30 S. Meridian Street, Suite
1100, Indianapolis, IN 46204. The
documents filed by RPAI with the SEC also may be obtained free of
charge at RPAI's website at www.rpai.com under the heading Invest
or upon written request to Investor Relations, Retail Properties of
America, Inc., 2021 Spring Road, Suite 200, Oak Brook, IL 60523, or IR@rpai.com.
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 Kite Realty Group, L.P. is set forth in KRG's proxy
statement for its Annual Meeting of Shareholders on Schedule 14A
filed with the SEC on March 31, 2021.
Information about RPAI's directors and executive officers and their
ownership of RPAI's common stock is set forth in RPAI's proxy
statement for its Annual Meeting of Stockholders on Schedule 14A
filed with the SEC on March 31, 2021.
To the extent that holdings of KRG's or RPAI's securities have
changed since the amounts reported in KRG's or RPAI's proxy
statement, such changes have been or will be reflected on
Statements of Changes in Beneficial Ownership on Form 4 filed with
the SEC. Additional information regarding the interests of those
persons and other persons who may be deemed participants in the
proposed transaction may be obtained by reading the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available. You may obtain free copies of these documents as
described in the preceding paragraph.
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.
Kite Realty Group – Investor Contact
Jason Colton, SVP, Capital Markets
& Investor Relations
317.713.2762
jcolton@kiterealty.com
Kite Realty Group – Media Contact
Bryan McCarthy, SVP, Marketing &
Communications
317.713.5692
bmccarthy@kiterealty.com
RPAI – Investor Contact
Michael Gaiden, SVP – Finance
630.634.4233
gaiden@rpai.com
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SOURCE Retail Properties of America, Inc.