Phillips Edison to Acquire Limited Partnership, Create $4 Billion Shopping Center REIT

Laguna 99 Plaza in Elk Grove, California, is one of 230 grocery-anchored shopping centers owned by the new REIT. Laguna 99 Plaza in Elk Grove, California, is one of 230 grocery-anchored shopping centers owned by the new REIT.

Cincinnati — Phillips Edison Grocery REIT I Inc. (OTC: PHLD) has entered into an agreement to acquire the real estate assets and third-party asset management business of its sponsor firm, Phillips Edison Limited Partnership (PELP), in a stock and cash transaction valued at roughly $1 billion.

The transaction is expected to close during the fourth quarter. Upon closing, the transaction will create a non-traded shopping center REIT with a total enterprise value of approximately $4 billion. The new REIT will own 230 grocery-anchored shopping centers spanning roughly 25.5 million square feet across 32 states.

Shareholders of Phillips Edison Grocery REIT I are expected to own approximately 80.2 percent of the new company, while PELP shareholders will own the remaining 19.8 percent.

The company’s pro forma for the first quarter of 2017 suggests that funds from the transaction would have generated an 8 to 10 percent increase per share. At the end of that period, the REIT’s common stock was valued at $10.20 per share, based on third-party valuations.

Under the terms of the deal, the REIT will refinance or assume approximately $501 million in outstanding debt. The new company is expected to have a total debt-to-enterprise value of 41.4 percent.

International financial advisory firm Lazard and law firm Sidley Austin LLP represented the grocery REIT in the transaction. Goldman Sachs & Co., JPMorgan Securities LLC and Keybanc Capital Markets served as financial advisors to PELP, and Latham Watkins LLP served as legal advisor to PELP.

Taylor Williams

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