Phillips Edison Grocery Center REIT to Internalize Management; Acquire 76 Shopping Centers from External Consultant

Move Develops $4 Billion Internally-Managed REIT Concentrated on Grocery-Anchored Centers

Alico Commons in Fort Myers, FL, is one of 76 grocery-anchored shopping centers Phillips Edison Grocery Center REIT I will acquire.
Alico Commons in Fort Myers, FL, is one of 76 grocery-anchored shopping mall Phillips Edison Grocery Center REIT I will obtain. Phillips Edison Grocery Center REIT I Inc. (PECO I) will get the property and property management organisation of its sponsor and external advisor, Phillips Edison LP, in a stock-and-cash deal

valued at$ 1 billion. The resulting entity will be an internally-managed, non-traded grocery-anchored shopping center REIT with an expected total business worth of $4 billion. Philips Edison LP owns and operates 76 shopping mall in 22 states totaling 8.7 million square feet.

The post-transaction enterprise will own a nationally-diversified portfolio of 230 shopping centers in 32 states amounting to 25.5 million square feet.

With the acquisition of the possession management business from the minimal partnership, Cincinnati-based PECO I will likewise take over management of its sis REIT, Phillips Edison Grocery Center REIT II, which owns 78 properties in 24 states totaling 9.6 million square feet, in addition to future homes owned by the newly introduced Phillips Edison Grocery Center REIT III, which has yet to begin fundraising and investing.

By beefing up its size and scale, the combined business believes it will be able to gain access to capital at lower expense to support other strategic investments, PECO I said. Outstanding debt of approximately $501 million is anticipated to be re-financed or assumed by PECO I at closing.

“Investors of PECO I will gain from a combined enterprise with internalized management, increased size and scale, higher earnings capacity, higher earnings development capacity, improved dividend coverage and enhanced access to capital,” said Stephen Quazzo, the chair of the special committee of PECO I’s board of directors.

Lazard is functioning as the special financial advisor and Sidley Austin LLP is serving as legal advisor to the special committee of the board of directors of PECO I. Goldman, Sachs & & Co., JP Morgan Securities LLC, and KeyBanc Capital Markets Inc. are serving as monetary advisors, and Latham Watkins LLP is functioning as legal consultant to the restricted collaboration.

The deal is anticipated to close throughout the 4th quarter of 2017.

On a pro forma basis, right away following the closing of the deal, PECO I shareholders are anticipated to own around 80.2%, and former PELP investors are anticipated to own roughly 19.8% of the combined business.

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