Retail Traffic

On the Make

It's been almost a year since the retail REIT sector saw a significant merger or acquisition, but one may soon be in the works between Inland American Real Estate Trust, Inc. and Ramco-Gershenson Properties Trust. On Apr. 7, Oak Brook, Ill.-based Inland filed a 13D form with the Securities and Exchange Commission, revealing that it owns a 5.6 percent stake in Farmington Hill, Mich.-based Ramco. The firm also said it was considering a further strategic alliance with Ramco that may take the form of a merger or an acquisition.

Ramco currently owns 20 million square feet of shopping center space, most of it concentrated in the Southeastern, Midwestern and Mid-Atlantic United States. Because its properties serve everyday consumer needs, they are less likely to be affected by the drop in consumer spending, wrote Cantor Fitzgerald analyst Philip Martin in an Apr. 8 note. Ramco also offers attractive valuation. Over the past year, the value of its stock decreased 48 percent, compared to the 21 percent decrease for the U.S. retail REIT sector as a whole, according to Jason Lail, senior research analyst with SNL Financial LC, a Charlottesville, Va.-based research firm. As of Apr. 17, Ramco's shares were trading at $22.53, still 37.4 percent below the $36 per share target price estimated by Cantor Fitzgerald.

“We have no idea what Inland would put out for an acquisition price, but there is definitely some room for arbitrage there,” says Lail. “It definitely could be a bit of a discount.”

The interest in Ramco is the second merger overture Inland has made this year. In January, the firm revealed that it amassed a 9.8 percent stake in the Port Washington, N.Y.-based REIT Cedar Shopping Centers.

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