Market Overview

Inland Real Estate Corporation to Acquire Joint Venture Partner's Interest in Portfolio of 13 High Quality Shopping Centers; Increases Consolidated Portfolio by 33 percent to $1.6B


Inland Real Estate Corporation (NYSE: IRC), 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.

Posted-In: News M&A


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