Pan Pacific Retail to Buy Center Trust
Pan Pacific Retail Properties Inc., the largest U.S. West Coast shopping center operator, agreed to buy rival Center Trust Inc. for $219 million in stock, plus assumed debt. The purchase ends a money-losing investment by Center Trust’s largest shareholder, Lazard.
San Diego-based Pan Pacific will issue 0.218 share of its stock for each share of Center Trust, said Stuart Tanz, Pan Pacific’s president and chief executive. That values Center Trust at $7.45 a share, a 31% premium to their closing price Tuesday.
The deal also includes the assumption or retirement of $364 million of debt and transaction costs.
A real estate fund managed by Lazard bought a controlling interest in Manhattan Beach-based Center Trust when shares of the real estate investment trust, then known as Alexander Haagen Properties, were trading at about $14.50. The New York-based investment bank will own an 8% stake in the combined company.
“Center Trust is a mixed bag,” said Tom Trotman, a fund manager with Delaware Management Co., which owns 1.13 million shares of Pan Pacific. Tanz “knows the markets extremely well. We have faith in him. It’s going to be interesting to see what they do with the weaker assets.”
The transaction is expected to be completed in the first quarter and is subject to approval of shareholders owning two-thirds of the company’s stock. Lazard, which owns a 52% stake in Center Trust, has agreed to vote in favor of the sale.
Pan Pacific shares fell 6 cents to $34.18 on the New York Stock Exchange. Center Trust rose $1.53 to $7.22 on the NYSE.
The purchase would boost Pan Pacific’s holdings by about 20% to 138 shopping centers with 19.4 million square feet of space.
“It enhances and balances our geographic distribution and broadens our tenant diversification,” Tanz said. “We will pare some of their assets.”
Center Trust’s shopping centers are largely based in Southern California, including the Media City Center in Burbank and the Fullerton Town Center, and are anchored by supermarkets.
