Indianapolis-based Kite Realty Group Trust announced in July that it would merge with Oak Brook, Illinois-based Retail Properties of America Inc. in an all-stock deal worth $2.8 billion.
The move, which closed in October, made Kite the fifth-largest shopping center real estate investment trust in the nation and—according to IBJ research— the ninth-largest general REIT by total value. (The largest, of course, is Simon Property Group Inc., also based in Indianapolis.)
Most important for central Indiana, the merged company retained the Kite name, its headquarters in Indianapolis and its leadership, with Kite Chairman and CEO John Kite continuing in the role.
John Kite now leads a company with an enterprise value of $7.5 billion and about 185 shopping centers totaling 32 million square feet, composed of 83 Kite-owned properties and 102 centers from Retail Properties, which merged into a Kite division.
The merger “is a great strategic match that lines up perfectly with many of the macro trends we’re seeing impacting our industry,” Kite said of the deal during a third-quarter call with analysts.
“It’s about the real estate,” he said. “Our top-quality assets are benefiting from being in high-growth, warmer and cheaper markets. These low-tax and business-friendly geographies continue to benefit from the highest population growth and corporate relocations.”
The merger more than doubled the company’s annualized base rent and leasable space in those markets, much of it in Texas and Florida.
Kite Realty Group Trust went public as a REIT—a type of public company modeled after mutual funds that disperse revenue to investors—in 2004, with John Kite becoming CEO at that time. Before that, he had been president of Kite Cos. for seven years. He joined the organization, founded in 1960, as chief financial officer of Kite Development in 1990.
John Kite’s move to acquire Retail Properties of America actually came after some downsizing. In 2019, Kite sold 14 of its non-core properties for a combined $415 million. And Retail Properties had been doing much of the same, selling 47 of its properties for a combined $917.8 million in 2017.
But the merged company has a larger, focused portfolio that observers told IBJ will make it easier to obtain financing for projects. “Having a lot more shopping centers across a lot more geographical areas means groups are going to be much more willing to lend to them,” said Roger Lee, a senior research analyst with Columbus, Indiana-based Kirr Marbach and Co. LLC.
That could come into play as Kite plans to redevelop Pan Am Plaza in downtown Indianapolis, a project that is proposed to include an expansion of the Indiana Convention Center and at least one massive, 814-room hotel.
John Kite told IBJ the merger would propel the company “into the next level in every key portfolio metric.”
“We strongly believe that one plus one is five here,” he said. “The things that we’ve both done historically to get us to this point—it just matched up very, very strongly.”•
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