Retail real estate investment trust (REIT), Regency Centers Corporation (REG) has made an unsolicited offer to buy AmREIT Inc. (AMRE) for $22 per share. The amount is payable either in cash or stock or a blend of both. The deal, if it consummates, would help Regency expand its portfolio in Texas and Georgia.
As a result, shares of AmREIT surged 16.93% during yesterday’s regular trading session while Regency’s shares were up a modest 0.43%.
Notably, this offer price reflects a 20% premium to AmREIT’s common stock average closing price over the past 30 days and is ahead by $2 per share of the all time high stock price of AmREIT.
Houston-based AmREIT has a strategic concentration of properties in the affluent, high-growth submarkets of Houston, Dallas, San Antonio, Austin and Atlanta. As of Mar 31, 2014, the company’s portfolio comprised 32 wholly-owned properties with around 1.5 million square feet of gross leasable area. These properties were 94.9% leased and The Kroger Co. (KR) and Safeway Inc. (SWY) rank among its top tenants.
According to Regency, the deal upon materialization would help AmREIT shareholders to immediately benefit from the cash value and/or stock of Regency, which would help in leveraging on the combined entity’s platform.
Furthermore, Regency believes that the offer is an attractive one for AmREIT shareholders. This is because AmREIT is a small sized company compared to other public REITs and, therefore, faces structural impediments such as limited and expensive capital access as well as more manifested exposure to the market and risks related to project concentration.
Regency’s offer enjoys the support of its board and the company is further willing to improvise on the offer. The company also disclosed that funding for this deal could be met from its existing credit facility. Moreover, Regency anticipates key experts from the AmREIT team could serve important positions with respect to the development of the densification prospects in AmREIT’s portfolio as well as in managing Regency’s Texas portfolio.
If this acquisition materializes, it would help Regency’s Texas shopping center portfolio to significantly increase in size and shareholders of the combine entity can leverage on the synergies generated. Hence, the acquisition would be in tune with Regency’s efforts to build a premium portfolio of grocery-anchored shopping centers and we view it positively.
Regency currently carries a Zacks Rank #2 (Buy) while AmREIT has a Zacks Rank #3 (Hold).
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