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Inland Real Estate Corporation
, a leading real estate investment
trust that owns and operates high quality, necessity and value based retail
centers in select markets in the Midwest, today announced that it has entered
into an agreement with New York State Teachers' Retirement System (“NYSTRS”)
to acquire NYSTRS' 50 percent ownership interest in the IN Retail Fund, L.L.C.
(“IN Retail”) for $121.0 million in cash. Upon the closing of this
transaction, the Company will own 100 percent of the outstanding membership
interests in IN Retail and the assets, liabilities and results of operations
of IN Retail will be included in the Company's consolidated financial
statements. IN Retail owns 13 shopping centers, aggregating approximately 2.3
million square feet of gross leasable area, with an estimated fair value
(agreed upon by the parties for purposes of this transaction) of approximately
$395.6 million, equating to an acquisition capitalization rate of 6.7 percent,
and total current outstanding mortgage debt of approximately $152.2 million,
plus other related assets and liabilities.
“The joint ventures we have established with institutional partners such as
NYSTRS, have been instrumental in advancing our growth objectives,” said Mark
Zalatoris, president and chief executive officer. “Since its formation in
2004, the IRC-NYSTRS joint venture has added more than $300 million in gross
value to our total portfolio and provided approximately $8.5 million in
high-margin fee income as of March 31, 2013. This venture has been a
capital-efficient way for the Company to acquire premier retail assets while
enhancing our yield on investment. However, the opportunity to acquire
NYSTRS's interest at this time advances our strategic goals to increase the
size and quality of our consolidated portfolio, simplify our ownership
structure and strengthen our balance sheet.”
The IN Retail Fund portfolio consists of eleven neighborhood, community and
power shopping centers located in the Chicagoland area; one neighborhood
retail center in a suburb of Minneapolis-St. Paul; and one community retail
center located near Racine, Wisconsin. The portfolio's estimated three-mile
average population is more than 111,500 and average household income is
approximately $82,900. As of March 31, 2013, the portfolio was 97.5 percent
leased, and financial occupancy of the portfolio was 93.4 percent.
The closing of the transaction must occur by June 14, 2013, provided, however,
that the purchase price will increase by $22,500 for each day after May 31,
2013 that closing does not occur. If the closing does not occur on or before
June 14, 2013 for any reason (including, without limitation, the willful
failure or refusal of either party to close the transaction), the agreement
will terminate and the parties will have no further rights or obligations
thereunder. The Company would then continue to own a 50 percent interest in IN
Retail.
The Company expects to fund the acquisition of NYSTRS' interest in the IN
Retail Fund, L.L.C., depending on the timing of the closing by utilizing
various sources of available capital, including proceeds received from various
capital markets activities, draws on its $175 million line of credit facility,
proceeds from the sale of consolidated assets and cash on hand. On a pro forma
basis, as of March 31, 2013, the Company's acquisition of NYSTRS' ownership
interest in IN Retail would have increased the amount of total assets on its
wholly owned, consolidated balance sheet to $1.6 billion from $1.2 billion.
Total weighted average consolidated debt would have increased by $152.5
million to $877.5 million; however, the ratio of total debt to gross assets
for the consolidated portfolio would have decreased to 45.5 percent from 47.3
percent, as of March 31, 2013. The transaction will expand the unencumbered
asset pool within the consolidated portfolio, as three of the thirteen
properties are currently unencumbered.
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