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Inland Diversified Finds a Buyer

Another liquidity event hits the non-traded REIT market place, this time it’s Inland Diversified Real Estate Trust, Inc. (Inland Diversified). In an announcement today, Inland Diversified has agreed to merge with Kite Realty Group (Kite) in a transaction valued at approximately $2.1 billion with an equity value of about $1.2 billion. 

The merger represents an all stock transaction in which each outstanding share of Inland Diversified will convert into the right to receive between 1.707 and 1.65 Kite common shares. 

In a statement, Inland Diversified offered, “Based on the $6.15 closing price for Kite’s common shares as of February 7, 2014, each outstanding share of Inland Diversified would be converted into the right to receive 1.707 Kite common shares. This would result in the consideration of $10.50 per share of Inland Diversified and a total return of between 14% for stockholders assuming an investment in August 2012, and 31% for stockholders assuming an investment in September 2009, or an average annualized return of approximately 8%.”

Kite Realty Group, NYSE KRG, was trading at $6.40 at the time of this article. 

“We’re excited to see the process we’ve been engaged in culminate in this transformational event for our company and our stockholders,” said Barry Lazarus, president and chief operating officer of Inland Diversified. “This transaction achieves our goal of maximizing value and provides an opportunity for our stockholders to either remain part of the well capitalized combined company or liquidate their investments.”

John A. Kite, Kite Realty’s Chairman and Chief Executive Officer said, “We are extremely pleased to announce what is a transformational transaction for our company. Inland Diversified has assembled a very well located, high quality portfolio. The asset and tenant quality and strong demographic profile will be a great complement to our portfolio. With this transaction, we will be able to substantially increase the size and scale of our portfolio in our core markets and enter into attractive new markets. This transaction will further strengthen our balance sheet and enhance our cash flow, positioning us favorably for future growth and shareholder value creation.”

Liquidity & Timing

Once the merger is finalized, Inland Diversified stockholders will have the choice of selling their shares of Kite Realty Trust (NYSE: KRG) or capture future growth potential by staying long.

The merger is currently expected to close at earliest, late second quarter or sometime in the third quarter of 2014, subject to the approval of shareholders from both companies and satisfaction of customary closing and regulatory conditions.

In December, Inland Diversified announced a definitive agreement to sell 84 single tenant properties for $503 million to Realty Income Corporation (NYSE: “O”). In a statement, “All or the majority of the net proceeds… will be used to pay down debt on existing properties of the combined company, which will facilitate a single, all-stock transaction for Inland Diversified’s stockholders.” This transaction is expected to close prior to the merger with Kite.

In addition, once the proposed merger closes, Kite expects to sell three multi-family assets owned by Inland Diversified as well as Inland Diversified’s securities portfolio. Proceeds from these sales will be used to pay down debt and to deleverage the balance sheet.