WORLD PROPERTY CHANNEL ®

David Fishcel

Without having to construct a single shopping center, North Miami Beach, FL-based Equity One Inc. will shortly be entering one of the country's strongest retail markets - Northern California.

The Florida REIT is buying London-based Capital Shopping Centers Group PLC in a stock and debt joint venture deal valued at $600 million, according to a prepared statement Monday by Equity One.

The transaction is expected to close late in the third quarter of 2010.

The portfolio of 15 California properties totals 2.6 million square feet and expands Equity One's geographic reach.

Equity One is acquiring Capital and Counties USA Inc. (C&C USA) through a joint venture with its parent company, Capital Shopping Centers Group PLC (Capital Shopping Centers).

Jeffrey S. Olson

In the transaction, Capital Shopping Centers will receive 4.1 million shares of Equity One common stock and 10.9 million joint venture units.

Capital Shopping Centers may redeem its units in the joint venture for Equity One common stock on a one-for-one basis or cash, at Equity One's option.

Equity One will assume approximately $330 million of mortgage debt, including its proportionate share of debt held by its joint ventures, with a weighted average interest rate of 5.7%.

"This transaction allows us to focus on our core business in the United Kingdom while providing an expansion platform for Equity One," says David Fischel, the CEO of Capital Shopping Centers. "

"By retaining a long-term investment in Equity One, we can participate in the significant growth potential of the combined enterprise."

C&C USA owns a portfolio of 15 properties in California totaling 2.6 million square feet, of which 70% of the transaction value consists of retail assets.

 The retail portfolio is concentrated in the San Francisco Bay Area and includes Serramonte Shopping Center in Daly City, Plaza Escuela in Walnut Creek, The Willows Shopping Center in Concord, 222 Sutter Street in San Francisco, and The Marketplace Shopping Center in Davis.

The retail portfolio was 83% leased as of April 30, 2010. When including several major leases recently executed or currently under letter of intent, the retail portfolio occupancy rate increases to 93%.

The average population density within a three-mile ring of the retail properties is 180,848 people and the average household income is $87,688.

The remaining 30% of the portfolio consists of medical office, office, undeveloped land and multifamily properties located in the Bay Area and Los Angeles. In keeping with its retail focus, Equity One intends to dispose of a majority of the non-core assets.

This transaction is consistent with Equity One's strategic plan, including entering California, diversifying the Company's geographic and tenant base and expanding its redevelopment pipeline, says Fischel.

He will join Equity One's Board of Directors following the closing of the transaction.

Upon completion of the transaction, Northern California will be Equity One's second largest market after South Florida, representing approximately 16% of its asset value.

"This is a unique opportunity for Equity One to expand its asset base into one of the most densely populated, supply constrained markets in the country in a transaction that is accretive to Equity One shareholders," says Jeffrey S. Olson, CEO of Equity One.

"Tenant sales are extraordinarily high within the retail portfolio and many of the assets contain future leasing, redevelopment, and expansion opportunities.

"In particular, the Serramonte Center, with only 849,061 square feet of developed rentable space on 81 acres just south of the city of San Francisco, offers substantial potential for further development and densification."

Turner Newton, who has been CEO of C&C USA since 1994, will continue to lead this subsidiary for Equity One.

Equity One intends to retain the majority of the in-place infrastructure, including C&C USA's operating, acquisition and asset management teams.

The transaction is expected to be modestly accretive to funds from operations in the first year prior to one-time transaction expenses and non-cash purchase accounting adjustments.

 The proforma capitalization rate is 7.0%.

Equity One expects to incur one time transaction expenses of approximately $0.05/share in 2010. Excluding these transaction expenses and given the timing of closing, Equity One reaffirms its prior 2010 FFO per share guidance of $1.00 to $1.08 per share.

Goodwin Procter acted as legal counsel and Eastdil Secured acted as financial advisor to Equity One. Skadden Arps acted as legal counsel and Bank of America Merrill Lynch acted as financial advisor to Capital Shopping Centres.

As of March 31, 2010, Equity One owned or had interests in 184 properties, consisting of 170 shopping centers comprising approximately 19.2 million square feet, three projects in development and redevelopment, six non-retail properties, and five parcels of land. Additionally, Equity One had joint venture interests in twelve shopping centers and one office building totaling approximately 1.9 million square feet.

Capital Shopping Centers Group PLC is one of the UK's largest listed property companies, a real estate investment trust (REIT) and a constituent of the FTSE-100 Index of the UK's leading listed companies.

On a pro-forma basis, at 31 December 2009, adjusted, diluted shareholders' funds amounted to £2.1 billion and Capital Shopping Centers Group PLC owned £5.0 billion of properties.

 It is the leading UK shopping center business with focus on prime assets including Lakeside, Thurrock; MetroCenter, Gateshead; Braehead, Glasgow; The Harlequin, Watford; and The Arndale, Manchester.

 

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