Phillips Edison REIT to Acquire $1B in Sponsor Assets

The combined company, which is expected to reach a total enterprise value of $4 billion, will own 230 shopping centers in 32 states.

In a stock-and-cash transaction valued at about $1 billion, Phillips Edison Grocery Center REIT I Inc. (PECO I) is to acquire real estate assets and the third-party asset management business of its sponsor and external advisor, Phillips Edison Limited Partnership (PELP), the companies announced.

Sterling Pointe Center in Lincoln, Calif.
Sterling Pointe Center in Lincoln, Calif.

The result will be an internally-managed, non-traded grocery-anchored shopping center REIT with an expected total enterprise value of $4 billion. It will own a nationally diversified portfolio of 230 shopping centers in 32 states “that is well positioned to drive sustained growth,” according to Phillips Edison.

Per the agreement, PELP will receive about 45.2 million operating partnership units in PECO I’s operating partnership and about $50.0 million in cash in exchange for the contribution of PELP’s ownership interests in 76 shopping centers and its third-party asset management business. The cash portion of the consideration will be used to retire certain minority interests in PELP to help ensure that the combined company maintains its qualification as a REIT.

Management will receive no cash consideration in this transaction and will be subject to traditional and customary lockup provisions. Further, no consideration is being paid for the advisory services that PELP provides to PECO I.

On a pro forma basis, PECO I shareholders are expected to own about 80.2 percent and former PELP shareholders about 19.8 percent of the combined company.

Outstanding debt of about $501 million is expected to be refinanced or assumed by PECO I at closing, which is expected to take place during the fourth quarter. 

Phillips Edison did not respond to Commercial Property Executive’s request for additional information.

Shareholders of PECO I will benefit from a combined enterprise with internalized management, increased size and scale, higher earnings potential, greater earnings growth potential, improved dividend coverage and enhanced access to capital,” Stephen Quazzo, the chair of the special committee of PECO I’s board of directors, said in a prepared statement.