Indianapolis-based Simon Property Group Inc. has completed its merger with New York-based Corporate Property Investors (CPI) and its paired-shared affiliate, Corporate Realty Consultants Inc. With the transaction's closing, Simon owns or has an interest in 241 properties in 35 states comprising total GLA of 165 million sq. ft.
The transaction valued CPI at approximately $5.78 billion, including the assumption of debt. Under the terms of the merger agreement, CPI shareholders received a consideration of $179 per share or $4.8 billion, consisting of $90 in cash, $70 in common stock and $19 in 6.5% convertible preferred stock.
David Simon, Simon's CEO, says, "The CPI portfolio of high-quality, market-dominant regional malls, coupled with the existing SPG assets and management team, creates a retail real estate powerhouse and the unquestioned industry leader."
Frederick Carr, founding principal of The Penobscot Group Inc., a Boston-based independent REIT analyst, says that while the merger of the two companies is good for Simon - placing the company in new markets - it may have put a financial strain on the rest of the REIT community. "This merger set off pricing wars and has set a benchmark for pricing these transactions," he says. The good news, he adds, is that these prices have begun to decline in the past 60 days.
At the time of the initial merger agreement, the Wall Street Journal reported that the CPI board accepted Simon's bid over bids from General Growth Properties, Chicago, and The Rouse Co., Columbia, Md., which bid in conjunction with Vornado Realty Trust, Saddle Brook, N.J. CPI was advised by Lazard Freres & Co. and J.P. Morgan & Co.