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INDIANAPOLIS-Kite Realty Group Trust and Prudential Real Estate Investors (PREI), on behalf of its investors, are joining to pursue joint venture opportunities for the development and selected acquisition of community shopping centers in the US. According to a released statement, as well as preliminary information released in August, the venture intends to develop and/or acquire up to $1.25 billion of well-positioned community shopping centers.
Under the terms of the agreement, Kite Realty Group has agreed to present to PREI opportunities to develop or acquire community shopping centers, each with estimated project costs in excess of $50 million. It is expected that equity capital contributions of up to $500 million would be made to the venture for qualifying projects throughout a four-year period.
Contributions would be made on a project-by-project basis with PREI contributing 80% and Kite contributing 20% of the equity capital. Equity capital, which has not yet been committed by either party, is expected to be leveraged at a rate of approximately 60% upon stabilization of each project. The first transactions have been allocated to PREI's PRISA II Account.
Kite Realty Group will manage any shopping centers developed or acquired under this arrangement and will receive additional fees for development, leasing and construction management services. Kite Realty Group will also have the opportunity to earn performance-based incentives.
John A. Kite, president and CEO of Kite Realty, says the arrangement will provide capital to fund new value-creating developments "such as our proposed Research Triangle Park project near Raleigh-Durham, NC." He adds that by partnering with PREI, the company will be able to reduce its overall borrowing costs and defer substantial equity contributions by Kite until a project is operational, allowing the company to maintain its borrowing capacity to fund future opportunities.
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