Centro Properties to Purchase
U.S. REIT That Owns Strip-Malls

Australia's Centro Properties Group agreed to purchase New York's New Plan Excel Realty Trust, a real-estate investment trust concentrating on neighborhood shopping centers, the companies announced last night.

Centro will pay about $3.7 billion for New Plan, or $33.15 per share. That price represents a 13% premium to New Plan's shares, which were down 2.3% to $29.34 in 4 p.m. Big Board trading on a day of sharp declines across Wall Street. The purchase is also expected to include about $2.5 billion of New Plan debt.

Australian companies have been eager buyers of corporate assets around the world. Flush with capital from government-advocated retirement schemes, the country's companies have been snapping up real estate, roads, utilities and other industrial companies.

The deal also continues a flurry of activity in the real-estate industry, which has seen a record amount of mergers and acquisitions and record prices. Unlike its shopping-mall cousin, which has seen just one deal in the past two years, the strip-mall industry remains relatively unconsolidated, leading to long-standing expectations that some companies would bulk up.

Strip-mall REITs have responded accordingly. Centro bought Heritage Property Investment Trust Inc. four months ago for $1.77 billion. Yesterday,Developers Diversified Realty Corp. closed on its $3.7 billion acquisition of Inland Retail Real Estate Trust Inc., a private REIT.

New Plan has had one of the weaker portfolios among strip-mall REITs, with occupancies and rental growth lagging behind its peers, according to Green Street Advisors, a Newport Beach, Calif., real-estate research firm. Its shares have performed well below average, returning 51.1% (including dividends) to investors during the past three years, compared with 97.8% for all strip-mall REITs, according to SNL Financial.

The company had been beginning to upgrade its portfolio, disposing of some weak assets and buying stronger ones. But strip malls overall have been strong of late, with consumers continuing to spend through a period of high energy prices, global turmoil and the popping of the housing-market bubble. And stock prices have been buoyed by solid earnings outlooks, with development pipelines and yields strong across the industry and strong net operating income growth at existing strip malls.

J.P. Morgan Chase & Co., Merrill Lynch & Co. and law firm Hogan & Hartson LLP acted as advisers to New Plan. Law firm Skadden, Arps, Slate, Meagher & Flom LLP advised Centro.

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