Kite Takes Flight With $7.5 Billion Merger
(photo courtesy of Kite Realty Group)
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis-based Kite Realty Group Trust (NYSE: KRG) and Retail Properties of America Inc. (NYSE: RPAI), headquartered in Chicago, say they have agreed to merge in a deal valued at $7.5 billion. Upon completion of the merger, the company’s headquarters will remain in Indianapolis with the Kite Realty Group name. The companies say jointly they will become the fifth largest outdoor shopping center real estate company in the U.S.
“This merger marks a momentous day for KRG and our shareholders,” Kite Realty Group Chairman and Chief Executive Officer John Kite said in a news release.
KRG says each RPAI common share will be converted into 0.6230 newly issued KRG common shares in a 100% stock-for-stock transaction. Kite says it will assume all RPAI debt.
The boards of directors of both companies have approved the merger, but the transaction must still get approval from shareholders.
“With the heavy lifting done on both sides and the current market environment rewarding the strength of open-air real estate, now is the perfect time to create a leading owner and operator of open-air shopping centers,” said Kite, who will continue to serve as chairman and CEO of the combined companies. “The combined company will have durable cash flows, operational upside and external value creation opportunities.”
RPAI CEO Steven Grimes says the combination brings together two companies with complementary portfolios.
“John and I have known each other for years. Just being Midwest guys who have a lot of familiarity and similarity in terms of our operational styles,” said Grimes. “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.
The merger will create an operating portfolio of 185 open-air shopping centers with 40% in the high growth states of Texas and Florida.
In addition to John Kite’s continued role as CEO, current Kite President and Chief Operating Officer Thomas McGowan will retain his position with the new company.
The companies expect the transaction to close during the fourth quarter of 2021 subject to customary closing conditions. It will continue to trade under the NYSE symbol KRG.
Kite Realty Group Chairman and Chief Executive Officer John Kite said despite e-commerce growth during the pandemic, brick and mortar retail is still valuable.
RPAI CEO Steven Grimes said the timing is right for the merger.