DRA to Take Inland Private After $2.3B Deal

Inland Real Estate, a publicly traded shopping center REIT, has agreed to be acquired by funds managed by DRA Advisors.
CreeksideCommons-Inland

Creekside Commons, Inland

Looking to find the best buy for its shareholders, Inland Real Estate Corp., a publicly traded shopping center REIT, has agreed to be acquired by funds managed by DRA Advisors in a cash deal valued at $2.3 billion, including assumed debt.

The Oak Brook, Ill.-based company’s portfolio has about 15 million square feet of neighborhood, community and power shopping centers, primarily in the Central and Southeastern United States. As of Sept. 30, IRC had interests in 135 fee-simple investment properties, including 36 owned through joint ventures.

Once the deal closes in early 2016, DRA Advisors, a New York-based investment advisor with $6.8 billion of assets under management, will make IRC a privately held REIT. The firm, which also has offices in San Francisco and Miami, has invested in properties valued at more than $23.5 billion.

The merger agreement calls for funds managed by DRA to acquire all issued and outstanding common stock for IRA at $10.60 per share in cash, which represents a premium of about 6.6 percent over the Dec. 14 closing stock price. IRC’s board of directors has unanimously approved the merger agreement and the merger. Stockholders must also approve the deal during a special meeting that has yet to be set.

IRC officials said the merger agreement with DRA Advisors is the culmination of a process that included extensive discussions with other potential buyers.

“The board has been focused on the options available to address the long-term discount at which the company’s shares have traded versus private market valuations and its shopping center REIT peers,” Thomas D’Arcy, non-executive chairman of IRC, said in a prepared statement. “The board unanimously believes this all-cash offer is the best course of action to address this valuation gap and provide our stockholders with strong relative value for their investment.”

“IRC is a company with quality assets, a strong management team and great long-term potential,” said DRA President David Luski. “We look forward to closing the transaction and adding the IRC platform to our portfolio.”

Mark Zalatoris, president & CEO of IRC, said company officials were pleased DRA recognized the value of the retail platform they had established.

“Over the years, our team has worked diligently to enhance the overall quality and performance of our retail portfolio,” he said.

IRC becomes the latest publicly traded REIT to be acquired this year with plans by new owners to go private. REIT stocks have been struggling this year because of fears of rising interest rates, and several companies have been sold or merged. In September,  private equity giant Blackstone Group announced it was buying Strategic Hotels &  Resorts, a luxury hotel REIT, for $6 billion including debt. The transaction closed last week and Strategic has ceased trading on the New York Stock Exchange.

DRA said it has obtained a commitment letter for debt financing from Wells Fargo Bank as lender and administrative agent, and Wells Fargo Securities as sole lead arranger and bookrunner.

BMO Capital Markets Corp. and Silver Portal Capital acted as financial advisors and Proskauer Rose L.L.P. acted as legal counsel to IRC. Blank Rome L.L.P. served as legal counsel to DRA. BMO Capital Markets Corp. also provided a fairness opinion to IRC’s board of directors.