Under the deal, Equity One will acquire IRT. The deal would more than double Equity One's shopping center portfolio. After the merger, Equity One will own 181 properties with a combined 18.7 million sf in 12 states. This includes 80 properties consisting of 8.4 million sf in Florida.
As part of the deal, for each share of IRT common stock, IRT shareholders may choose to receive $12.15 in cash, 0.9 shares of Equity One common stock or a combination of the two. The agreement also provides that the holders of 50% or less of IRT's outstanding common stock may get cash.
With a 50% cash election and the $13.59 closing price for Equity One common stock on Oct. 28, IRT is valued at $730 million. This includes Equity One's assumption of $297 million in IRT debt and transaction costs.
Equity One plans to fund part of the cash consideration through the private placement of as many as 6.9 million shares of Equity One common stock to existing, affiliated investors at $13.30 per share to $13.50 per share as the number of IRT shares converted into Equity One common stock increases from 50% to approximately 55.8%. Equity One plans to fund the rest of the cash consideration with existing and new credit facilities.
The merger is huge in the industry. "It's a real synergistic, complementary merger," shopping center specialist Mark Gilbert, senior director with the Miami office of Cushman & Wakefield of Florida, tells GlobeSt.com. "There's very little crossover in the submarkets in which they own properties. The few submarkets where they have competing centers happen to be in the stronger markets."
Equity One has a stronger presence in South Florida, where its portfolio consists of 17 centers. The REIT also has nine centers in North Florida. IRT has stronger exposure in the Orlando area, Tampa, Jacksonville and the Panhandle.Equity One president and chief operating officer Doron Valero says the company plans to pursue more investment opportunities in its existing and new markets, while continuing to emphasize supermarket-anchored shopping centers.
Howard Sipzner, Equity One's treasurer and chief financial officer, said in a prepared statement that the company's valuation of IRT's real estate holdings indicates a 2003 capitalization rate of 9.75%. The transaction is expected to be completed in the first quarter of next year. Shareholders of both REITs still must approve the merger, although, the boards of each have unanimously approved it.
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