Excel Trust disclosed today that it had entered into a definitive agreement to be bought by Blackstone Property Partners, a division of Blackstone Group, for about $2 billion in cash.
The announcement comes close on the heels of General Electric disclosing that Blackstone Group and Wells Fargo & Co would buy most of the assets of GE Capital Real Estate in a deal valued at about $27 billion.
Blackstone would pay $15.85 per share to Excel Trust
Blackstone Property is offering Excel Trust shareholders $15.85 per share, representing a premium of 14.5% to Excel’s closing price on Thursday. Reacting favorably to the announcement, Excel’s shares were trading at $15.81 in early trading on Friday. Excel Trust shares have rallied 29% in the past 12 months.
Excel indicated that in addition to the common stock dividend of $0.18 per share payable on April 15, 2015, Excel Trust intends to pay an additional common stock dividend in July 2015, but, under the terms of the agreement, not for any quarter thereafter.
Excel Trust is a REIT that primarily targets community shopping centers, power shopping centers, and grocery-anchored neighborhood centers. It has about 38 retail properties, with some of the biggest tenants include Dick’s Sporting Goods and Publix Super Markets.
Excel’s revenue rose 16% to $130 million last year, though it reported a net loss of $3.3 million compared to a gain of $8.5 million in 2013.
The acquisition is currently anticipated to be completed in the second half of 2015. As part of the closing of the transaction, the companies intend that Excel Trust’s $75 million of 4.40% Senior Series A Notes due 2020 and its $25 million of 5.19% Senior Series B Notes due 2023 will be repaid. However, Excel Trust’s $250 million of 4.625% senior notes due 2024 will remain outstanding following the closing.
Real estate has overtaken PE for Blackstone
Real estate has overtaken private equity as Blackstone’s most high-profile and lucrative business, and the company now has the world’s biggest private real estate investment business. Real estate constituted 43% of Blackstone’s economic net income in 2014, and the firm’s real estate business has $81 billion of assets under management.
Underscoring the potential in retail real estate, Excel Trust’s CEO Gary Sabin said: “Appetite for high-quality retail real estate is strong with cap rates and REIT stock multiples approaching historic levels and we did not believe the market accurately reflected the value of the assets”.
Several leading REITs have steered away from tenants threatened by e-commerce, instead aiming to invest in shopping centers that are deemed all-weather platforms. By offering space to “necessity-based” tenants, these REITs have been able to capture more predictable rental income.
Blackstone has been successful with its shopping center investments. For instance, in 2013, the Private Equity owners took Brixmor public resulting in a $458 million offering. Recently, Blackstone and DDR Corporation combined forces to acquire the multi-tenant portfolio for American Realty Capital Properties.