Remember the era when it felt like half of all retail REITs were buying the other half?
The result was the consolidation of enclosed mall ownership among just a handful of major companies, many of which have more recently divested some of their holdings to smaller, private firms. The same was not true of smaller projects; despite the presence of a few mega-companies like Kimco Realty, neighborhood center ownership remains quite fragmented.
But maybe consolidation is starting up in this sector. Regency Centers has offered to acquire AmREIT for $22 per share in cash or stock (about $433 million), some $2 per share above the latter's all-time stock price. The deal, if it goes through, would give Regency a much larger presence in Texas (including prominent areas in Houston) as well as additional properties in Georgia. AmREIT's portfolio was 97.6 percent occupied as of the end of the first quarter, according to its conference call, during which executives discussed their own plans to make targeted acquisitions. (AmREIT went public less than two years ago.)
AmREIT may not agree that the deal is “an opportunity to leverage synergies,” according to the letter Regency Chairman Hap Stein sent to AmREIT Chairman H. Kerr Taylor, and made public on Regency's website.
“While we had hoped to be able to explore a potential transaction with AmREIT on a non-public basis, unfortunately to date you have declined our requests to share information and otherwise engage in the kind of process that would enable us to move forward toward that end,” Stein wrote.
That doesn't sound like a friendly merger to me. But the offer clearly is the latest in what may be a trend in the making. Kite Realty just closed its acquisition of Inland Diversified Real Estate Trust.
There's plenty of opportunity for consolidation in this sector. But the Regency/AmREIT deal or lack thereof may be a harbinger as to whether deals will get done.
What do you think?
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