SAN DIEGO - Vista, Calif.-based Pan Pacific Retail Properties Inc. has agreed to purchase Emeryville, Calif.-based Western Properties Trust in a stock-for-stock transaction valued at $440 million. Upon completion, Pan Pacific will be one of the largest West Coast neighborhood shopping center real estate investment trusts (REITs), with an expected total market value of approximately $1.3 billion.
The transaction has been unanimously approved by the company's board of directors and is expected to be completed by the fourth quarter of 2000, subject to approval by the shareholders of both companies. As a result of the transaction, Pan Pacific will own and operate 110 centers and approximately 14.3 million sq. ft. of space, predominantly located in five West Coast regions: Northern California, Southern California, Oregon, Washington and Nevada.
"The transaction will create a unique and powerful platform for growth and increase shareholder value," says Stuart Tanz, president and CEO of Pan Pacific. "The Western portfolio provides a strategic fit and is a perfect complement to our existing geographic locations. The transaction will strengthen our position in high barrier-to-entry growth markets such as San Francisco, Sacramento and Portland."
Western Properties stock will be exchanged for $.62 per share of Pan Pacific stock. Pan Pacific will issue approximately 11.7 million common shares and units to Western's equity holders. It will then use approximately $65 million under its unsecured line of credit to retire Western's bank line and pay transaction costs. In addition, Pan Pacific will assume Western's $125 million senior notes and $10 million mortgage.
"Stockholders will benefit from an anticipated stronger earnings growth and a greater diversification of assets and tenants," adds Tanz. "The transaction will enhance Pan Pacific's value, presence and visibility in the capital markets, and will position the company as a leading consolidator of shopping centers on the West Coast."
Pan Pacific will continue to be led by its existing management team, which includes Tanz as president and CEO, Joe Tyson as CFO and Jeff Stauffer as COO. After the transaction is completed, Pan Pacific intends to enter into a joint venture with certain senior executives of Western, led by its chairman, president and CEO Bradley Blake, to complete Western's three retail development projects currently in progress. "We are very pleased with the proposed transaction," says Blake. "Our board has looked at a number of strategic alternatives and concluded that this transaction is in the best interest of our shareholders."
Once the transaction is complete, Pan Pacific's tenant base will increase from 1,400 retailers to more than 2,100, and approximately 80% of the total gross leasable area (GLA) will be leased to national and regional retailers.