Nontraded REIT Inland Diversified Real Estate Trust to merge with Kite Realty Group Trust

$2.1 billion all-stock deal expected to close in second or third quarter

Feb 10, 2014 @ 1:27 pm

By Bruce Kelly

Another nontraded real estate investment trust is about to have a liquidity event.

Inland Diversified Real Estate Trust Inc. said Monday that it has agreed to merge with Kite Realty Group Trust, a publicly traded REIT, in a $2.1 billion all-stock deal.

The merger, which is expected to close in the second or third quarter, is based on a $6.15 a share closing price for Kite Realty Group Trust, which trades under the symbol KRG. Each outstanding share of Inland Diversified Real Estate Trust will be converted into about 1.7 KRG shares.

That would value Inland Diversified Real Estate Trust of $10.50 a share. Most investors bought shares of Inland Diversified Real Estate Trust at $10 a share.

Investors would see a total return of 14% assuming an investment in August 2012 and a 31% return for investors who bought shares in September 2009, or an average annualized return of 8%, according to the company.

Kite Realty Group Trust's valuation of Inland Diversified Real Estate Trust takes into account an earlier deal.

In December, Inland Diversified Real Estate Trust announced a sale of a portfolio of single-tenant, net lease properties to Realty Income Corp. for about $500 million.

Inland Diversified Real Trust is one of the REITs under the Inland Real Estate Group of Cos. Inc.

When the merger is completed, Inland Diversified Real Estate Trust stockholders will get access to full liquidity, the company said in a statement.

Another nontraded REIT sponsored by the Inland Real Estate Group last month signaled that it may soon be in line for a merger or listing.

Inland American Real Estate Trust Inc., the largest nontraded REIT with $9.5 billion in assets, told investors that it was suspending its share buyback program, an indication that it may be in line for a liquidity event.

Last week, publicly traded REIT W.P. Carey Inc. said that it had completed its acquisition of an affiliated nontraded REIT, Corporate Property Associates 16 Global Inc.

Last year, six nontraded REITs announced or transacted “liquidity events,” including Corporate Property Associates 16 Global.

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