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Washington Prime to Buy Glimcher Realty Trust for $2 Billion

Tuesday, 16 Sep 2014 05:53 PM

Washington Prime Group Inc., a U.S. shopping-center landlord spun off this year from Simon Property Group Inc., agreed to buy Glimcher Realty Trust for about $2 billion to create a diversified retail property owner.

Glimcher stockholders will receive $10.40 in cash and 0.1989 of a share of Washington Prime for each Glimcher share, the companies said Tuesday in a statement. Based on Monday’s closing prices, the transaction valued Columbus, Ohio-based Glimcher at $14.07 a share, a 33 percent premium.

The deal gives Washington Prime more malls, outlet and open-air shopping centers and an operating platform for its business, which is currently managed under an agreement with Simon that runs through May 2016. The combined company expects to increase income through higher occupancies and rents.

“This adds a very high quality mix of assets to our portfolio,” Mark Ordan, chief executive officer of Bethesda, Maryland-based Washington Prime, said today on a conference call with analysts. “This puts us in great shape.”

The transaction is valued at about $4.3 billion including debt, the companies said. The new entity, to be known as WP Glimcher, will have about 68 million square feet (6.3 million square meters) of gross leasable space at 119 U.S. properties.

Ordan will be chairman of WP Glimcher, which will be based in Columbus. Glimcher Realty Chairman and CEO Michael Glimcher will be CEO of the combined company.

Shares React

On Tuesday, Glimcher shares jumped 30 percent to $13.75, the biggest gain since March 2009 and highest price in six and a half years. Washington Prime fell 6.6 percent to $17.24.

“The new entity has a higher-quality portfolio and a solid balance sheet,” R.J. Milligan, an analyst at Raymond James & Associates Inc. in St. Petersburg, Florida, said in a telephone interview. “It’s a great price for Glimcher and it’s going to enable the new company to continue to acquire retail properties in the United States.”

Glimcher was founded in 1959 by Michael Glimcher’s father, Herbert, as Glimcher Co., a developer of strip centers and single-tenant buildings, according to the company’s website. Over the years, the company changed strategies and, under Michael Glimcher’s leadership, sold lower-quality properties and bought and developed higher-end shopping centers and open-air malls to boost growth.

Simon Buys

As part of the Washington Prime deal, Simon Property, the largest U.S. real estate investment trust, will acquire Jersey Gardens in Elizabeth, New Jersey, and University Park Village in Fort Worth, Texas — properties currently owned by Glimcher — for $1.09 billion in cash. Simon, based in Indianapolis, spun off Washington Prime in May to focus on its regional malls and outlet business.

Washington Prime, which has a market value of about $2.7 billion, needed to sell properties including Jersey Gardens to afford the Glimcher purchase, Ordan said.

“If we could’ve afforded it, we would’ve kept it,” he said on the conference call.

The combined company may seek to buy more properties where tenant sales are lower on a per-square-foot basis than at malls owned by Simon and other top-tier landlords, said Jeffrey Langbaum, a Bloomberg Intelligence analyst.

“They may want to grow to be the dominant player,” he said. When Simon spun off the company, “they clearly envisioned that there would be growth opportunities for Washington Prime.”

The purchase of Glimcher is scheduled for completion in the first quarter of next year. Citigroup Inc. is Washington Prime’s financial adviser, while GreenOak Real Estate LP and Morgan Stanley represented Glimcher.

The acquisition will be “slightly accretive,” Ordan said on the conference call, without giving details of the expected earnings impact.

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Washington Prime Group Inc., a U.S. shopping-center landlord spun off this year from Simon Property Group Inc., agreed to buy Glimcher Realty Trust for about $2 billion to create a diversified retail property owner.
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Tuesday, 16 Sep 2014 05:53 PM
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