Kite Realty Group Trust, an Indianapolis-based owner of U.S. shopping centers, agreed to acquire Inland Diversified Real Estate Trust Inc. for about $1.2 billion to expand its holdings and enter new markets.
The all-stock transaction values Inland Diversified at about $10.50 a share, Kite said in a statement today. Inland Diversified, based in Oak Brook, Illinois, is a real estate investment trust that isn’t traded on exchanges.
The deal will double Kite’s shopping-center holdings to about 20 million square feet (1.9 million square meters) owned, with 131 properties in 26 states. The REIT, which has a market value of about $836 million, will enter areas including Las Vegas, Salt Lake City and Westchester County, New York.
“Inland Diversified has assembled a very well-located, high-quality portfolio,” Kite Realty Chairman and Chief Executive Officer John A. Kite said in the statement. “The asset and tenant quality and strong demographic profile will be a great complement to our portfolio.”
Kite shares rose 3.4 percent to $6.36 today. They lost 3.2 percent this year, the second-worst performance in the Bloomberg REIT Shopping Center index.
Nontraded REITs have a finite life span and eventually have to merge with another company, list their shares, or liquidate portfolios to return money to shareholders. Inland Diversified had other buyout offers, Barry Lazarus, president and chief operating officer, said in a telephone interview. He declined to discuss how many or other specifics.
The company announced an agreement in December to sell $503 million of single-tenant properties to Realty Income Corp. The transaction should be completed before the Kite deal closes. Kite also said it expects to sell three multifamily properties and Inland’s securities portfolio.
Inland Diversified decided against a share listing because REITs with smaller market values have difficulty gaining coverage by analysts, Lazarus said. Inland as a whole is about a $2 billion company, he said.
“We find that you start getting a lot more attention when you approach the $4 billion number,” Lazarus said. “We could list, but we’re still going to be $2 billion.”
The Kite merger is expected to be completed late in the second quarter or in the following three months. John Kite will serve as chairman and CEO of the combined company.