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Phillips Edison Grocery Center REIT III Plans to Merge with Phillips Edison & Company

Phillips Edison Grocery Center REIT III Inc., a publicly registered non-traded real estate investment trust co-sponsored by Phillips Edison & Company and Griffin Capital Company, is planning to merge into Phillips Edison & Company.

Phillips Edison Grocery Center REIT III Inc., a publicly registered non-traded real estate investment trust co-sponsored by Phillips Edison & Company and Griffin Capital Company, is planning to merge into Phillips Edison & Company, an internally managed REIT, according to a preliminary filing with the Securities and Exchange Commission. The boards of both companies approved the proposed merger, which is subject to PECO III shareholder approval.

For the merger consideration, holders of PECO III Class A common stock will receive 0.6693 shares of PECO common stock and $0.0939 in cash per share. Class I shareholders will receive 0.7436 shares of PECO common stock and $0.0941 in cash per share. Class T shareholders will receive 0.7749 shares of PECO common stock and $0.0989 in cash per share.

All shareholders will have the ability to receive additional shares of PECO common stock instead of the cash portion of the merger consideration, based on the most recent estimated net asset value per share of PECO common stock of $11.10.

The company noted that the merger consideration is higher than both the mid-point ($6.54) and high-end ($6.88) of PECO III’s NAV per share range.

In addition, PECO III’s advisor and/or co-sponsors plan to waive the reimbursement of all organization or offering expenses incurred in PECO III’s private and public offerings, as well as all asset management fees and acquisition fees and expenses, disposition fees, and will pay all of PECO III’s merger transaction expenses.

The company’s said that the distribution rate that PECO III stockholders will receive after the merger will be higher than the recently reduced distribution rate PECO III intends to pay, which is based on its anticipated cash flows from operations as a stand-alone company.

“The PECO III special committee considered possible alternatives to the merger, including continuing to operate PECO III on a stand-alone basis, liquidating the company, or seeking a business combination with or sale of assets to another party, and believes that the merger is the best available option for PECO III and its stockholders given relative valuation, timing and transaction cost considerations,” as stated in a preliminary letter to shareholders.

Shareholders will vote on the proposed merger at a yet-to-be scheduled special meeting.

Phillips Edison & Company Inc. (formerly known as Phillips Edison Grocery Center REIT I Inc.) is one of the nation’s largest owners and operators of grocery-anchored shopping centers. The company oversees a portfolio of 298 properties totaling approximately 33.5 million square feet, as well as minority interests in two joint ventures. The company’s offering was declared effective by the SEC in August 2010 and raised approximately $1.8 billion in investor equity before closing in February 2014.

Phillips Edison Grocery Center REIT III also focuses primarily in grocery-anchored neighborhood and community shopping centers. The REIT’s registration statement for its initial public offering was declared effective by the Securities and Exchange Commission in May 2018 and Griffin Capital Securities LLC served as the dealer manager for the offering. The company suspended its public offering on June 14th pending a review of strategic alternatives.

As of the second quarter of 2019, the company’s portfolio consisted of three properties. In November 2018, the company formed a joint venture with Northwestern Mutual and contributed its ownership interests in three grocery-anchored shopping centers in exchange for $41.3 million in cash and a 10 percent ownership interest in the joint venture. Northwestern Mutual made an initial capital contribution of $42.6 million in cash in exchange for a 90 percent ownership interest in the joint venture.

During the private placement offering that launched in October 2016, the REIT raised $57.7 million, while the public offering raised approximately $6 million, as of the second quarter 2019.

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