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Centro Nabs New Plan For $6.2B

In case you’re keeping score, the retail REIT deal book just popped over $20 billion. Three weeks after Simon Property Group reached a deal to buy Mills Corp. for $7.9 billion and the same day Developers Diversified Realty Corp. closed on its previously announced $6.2 billion takeover of Inland Retail Real Estate Trust Inc., Australia-based Centro Properties Group announced a deal to buy New Plan Excel Realty Trust for $6.2 billion.

After the deal closes, Centro will control a portfolio containing 679 centers and totaling 105 million square feet—making it the third largest owner of neighborhood and community shopping centers in the United States after Kimco Realty Corp. and Developers Diversified Realty.

On Monday, UBS REIT analyst Scott Crowe had pegged New Plan as a possible acquisition target, “because we believe only a few major public players will eventually dominate this space due to strong investment demand for neighborhood centers.”

And the market should prepare itself for more acquisitions in the sector, says David Leivowitz, an analyst with Burnham Securities, Inc. The most likely targets are those companies “whose stock does not accurately reflect either the asset base or the growth rate or some unique features that they might represent.”

Crowe pegged Pennsylvania REIT as a possible target. The company operates mostly Class B assets and doesn’t own the dominant malls in any of its markets. Crowe speculated a bigger mall with Class A assets could “better leverage their A mall platform to push rents and improve tenant mix in PEI's B mall platform.”

The New Plan/Centro deal is expected to close in the second quarter of 2007, removing New Plan, the fourth largest shopping center REIT in the country, from the list of publicly-traded retail real estate companies. The transaction was unanimously approved by New Plan’s board of directors and is awaiting shareholder approval. It is not contingent on Centro receiving financing or approval from its shareholders. New Plan owns interests in and manages 68.3 million square feet of space in community shopping centers. Neither New Plan nor Centro returned calls seeking comment.

Centro will pay $33.15 per share for New Plan—a 12.9 percent premium on where New Plan’s stock closed Tuesday night.

“The price is certainly higher than we would expect,” says Richard Moore, an analyst with RBC Capital Markets.

Some analysts, including Bear Stearns’ Ross Smotrich and Citigroup’s Jonathan Litt, note that the deal’s 3 percent breakup fee opens the door for other bidders, as was the case when Simon upped a bid from Brookfield Asset Management to capture Mills. But Moore figures that since New Plan has been on and off the market for several years, there are probably no surprise bidders in the wings. “It was shopped before, so I don’t think anyone else is going to bid for them,” he notes.

New Plan positioned itself for a sale over the past several years by morphing from a diversified REIT with interests in neighborhood centers, apartments and outlet malls. Since late 2000, it has shed $900 million in assets to focus exclusively on neighborhood and community shopping centers.

This is Centro’s third major U.S. acquisition as it continues to rapidly build a portfolio of community and neighborhood shopping centers. Last July, the company acquired East Coast shopping center REIT Heritage Property Investment Trust for $3.2 billion. In December 2004, it merged with Kramont Realty Trust in a $1.3 billion deal.

After the deal was announced, New Plan’s stock went from $29.43 per share at the close of the day on Tuesday, to a new 52-week high, $33.54 per share by noon today, representing a jump of almost 14 percent. The stock’s previous high was $30.93, which it reached last Tuesday.

-- Elaine Misonzhnik

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