Gerald E. Egan, chief executive officer of Rodamco North America N.V., said his company’s acquisition of Urban will transform it into a fully integrated, self-managed company. "Urban’s strengths in property management and leasing will enable RNA to replace functions that we previously outsourced to third parties. These strengths will give us the capability to reduce costs and maximize the value of our current portfolio."

Egan emphasized, "This is a rare opportunity to bring together two companies with regional mall portfolios of extraordinary quality. Portfolio sales per square foot are expected to be approximately $445 on a pro forma basis in 2000, which we believe will be one of the highest in the industry." With the completion of this acquisition, RNA will become the third largest regional mall company in the United States [behind two REITs; that is Simon Property Group and General Growth Properties], more than doubling in size to approximately $7 billion in assets."

Egan said the acquisition builds on RNA’s strategy to focus on its core business of high-quality regional malls in the United States. RNA currently has interests in 16 regional shopping malls, totaling approximately 20 million square feet, with properties in 11 states. After the acquisition, RNA will have a combined portfolio of 36 regional malls, totaling 40 million square feet, with properties in 15 states.

RNA’s newly combined portfolio will include: Water Tower Place in Chicago, Copley Place in Boston, Houston Galleria in Houston, San Francisco Shopping Center in San Francisco, Century City Shopping Center in Los Angeles, Perimeter Mall in Atlanta, Florida Mall in Orlando, and Garden State Plaza in Paramus, New Jersey.

Matthew S. Dominski, Urban’s CEO, said the $48 all-cash offer not only provides an attractive value for Urban shareholders, but also is good for the company’s employees. "We expect Urban’s employees to continue with the new company."

Egan, who will continue as CEO of the newly merged entity, commented, "Our new combined management team will have strong depth and expertise, with leaders from both companies assuming key positions." Urban’s Dominski and Adam Metz, Urban’s current president, will be an integral part of the company following the merger, Egan added, and the supervisory and management boards of RNA will remain unchanged. RNA’s U.S. operations will be headquartered in Chicago.

The original founders of Urban, which in the aggregate currently own a 35 percent interest in Urban on a fully diluted basis, will retain a non-controlling minority interest in the Urban portfolio. The original founders of Urban have agreed to vote in favor of the acquisition as part of the definitive agreement.

Chase Securities is the exclusive financial advisor to RNA in this transaction as well as the sole lead arranger and book manager for the acquisition financing. The Chase Manhattan Bank has committed to provide RNA acquisition financing of $1.66 billion, allowing RNA to fund 100 percent of the acquisition price and working capital requirements. Morgan Stanley Dean Witter acted as financial advisor to the Urban Board and has issued a fairness opinion in connection with the proposed transaction.

Mack-Cali and Prentiss Call the Whole Thing Off
Mack-Cali Realty Corporation and Prentiss Properties Trust have mutually agreed to terminate their previously announced merger agreement. In addition, Mack-Cali’s board has authorized an increased share repurchase program through which Mack-Cali is authorized to repurchase up to $150 million of its outstanding common stock in the open market or through private transactions with the amount and timing of repurchases depending on market conditions. The board previously had authorized the repurchase of up to $100 million of Mack-Cali common stock, of which the company had already purchased approximately $52.6 million. Mack-Cali currently has 73.3 million shares and units outstanding.

Subsequent to the announcement that the merger had been called off, Mack-Cali’s board hiked the company’s quarterly cash dividend by 5.2 percent, from $0.58 to $0.61 per share. The increase is effective for the quarter ending September 30, 2000.

In commenting on the decision to terminate the merger agreement with Prentiss, Mitchell E. Hersh, Mack-Cali’s CEO remarked, "We have carefully explored where Mack-Cali is today and concluded that having the flexibility and authorization to repurchase up to $150 million Mack-Cali common shares is a prudent use of our resources given our confidence in the long-term potential of the company."

According to Hersh, the Mack-Cali board determined that termination of the merger agreement with Prentiss Properties was in the best interests of Mack-Cali shareholders after lengthy discussions with Prentiss Properties and an extensive internal strategic review conducted to identify Mack-Cali’s strongest growth prospects. Mack-Cali worked with Donaldson, Lufkin & Jenrette in connection with the strategic review and with Prudential Securities Incorporated and Donaldson, Lufkin & Jenrette with respect to the Prentiss transaction.

"We have determined that it is in the best interests of Mack-Cali and its shareholders that we implement a highly focused growth strategy geared to attractive opportunities in high-barrier-to-entry markets, including locations such as California, but primarily predicated on our strong presence in the Mid-Atlantic and Northeast regions and an experienced operating infrastructure to take advantage of attractive opportunities consistent with this growth strategy," Hersh added.

Under the terms of the negotiated termination agreement, Prentiss Properties will purchase Mack-Cali’s 270,000-square-foot Cielo Center in Austin, Texas, for $47,175,000. The property was acquired by Mack-Cali in March 1998 for $37.4 million. In connection with the termination, Mack-Cali also deposited $25 million in an escrow account for the benefit of Prentiss Properties.

Mack-Cali owns or has interests in 266 properties, primarily office and office/flex buildings, totaling approximately 28.2 million square feet, located in 12 states and the District of Columbia. The properties are primarily located in the Northeast.

CBL To Acquire 21 Malls From Jacobs Group For $1.2 Billion
CBL & Associates Properties, a mall REIT, and The Richard E. Jacobs Group of Cleveland, have signed a definitive agreement, the terms of which call for Chattanooga, Tennessee-headquartered CBL to acquire Jacobs’ interests in 21 regional malls and two associated centers for approximately $1.2 billion. The acquisition is expected to close in the first quarter of next year.

The portfolio, totaling approximately 19.2 million square feet, includes five malls in Wisconsin; three each in North Carolina, Kentucky, and South Carolina; two each in Michigan and Ohio; one each in Illinois, Tennessee, and Texas; and an associated center in both Ohio and Wisconsin.

The purchase price includes approximately $106 million in cash, including closing and transaction costs of approximately $12 million; assumption of $733.8 million in primarily fixed rate nonrecourse debt at an average interest rate of 8.25 percent; and the issuance of 11.932 million SCUs (special common units) of CBL’s operating partnership with a par value of $384.8 million.

The SCUs will be entitled to receive an initial annual dividend of $2.90 per SCU and will be exchangeable on a one-for-one basis for shares of CBL’s common stock following a three-year lockout period. After 10 years, CBL will have the right to force conversion of the SCUs for common units in CBL’s operating partnership.

The cash portion of the purchase price will be funded through a $212 million unsecured acquisition loan from Wells Fargo Bank that will allow for payment of closing and transaction costs. The loan also will allow for the draw down of funds for additional investment in the properties.

CBL said the transaction is immediately accretive to its funds from operation. "Based on the first full 12 months of net operating income, the transaction is accretive by approximately $0.20 per share." In calendar year 2001, the company estimates it will realize approximately $0.08 per share of accretion. The remaining $0.12 per share represents the impact from generally accepted accounting principles treatment of first year’s percentage rents from these properties and will be recognized in 2002 earnings.

When the acquisition is concluded, CBL’s portfolio will total 161 properties, including 51 enclosed malls, representing 55 million square feet in 26 states.

Upon approval of the transaction, CBL’s board of directors will increase from seven members to nine. Jacobs will be entitled to nominate two independent directors, one of whom is a current member of Jacobs’ management.

Security Capital Group and SC-U.S. Realty Plan Merger
Security Capital Group and SC-U.S. Realty have entered into a definitive agreement to combine the two businesses. Under the terms of the agreement, shareholders of SC-U.S. Realty will receive 1.15 shares of Security Capital Group’s class B common stock for each share of outstanding SC-U.S. Realty stock, and Security Capital will acquire the assets and assume or provide the necessary funds to satisfy the liabilities of SC-U.S. Realty.

The number of shares of SCZ stock to be received for each share of RTY stock represents an 8.5 percent premium over the relative average trading prices of the two stocks for the past 30 days.

The agreement was unanimously approved by the board of SC-U.S. Realty, based upon review, approval, and unanimous recommendation by a special committee of the SC-U.S. Realty board consisting of three of its independent directors and unanimously approved by the board of Security Capital. The total value of the transaction is approximately $1.4 billion, excluding the value of the SC-U.S. Realty shares owned by Security Capital.

Additionally, Security Capital’s board increased its previously announced $100 million stock buyback program to a total of $450 million, with the increase to be implemented after the closing of the transaction. The authorized increase includes up to $200 million that will be available to dissenting SC-U.S. Realty shareholders that elect to receive cash in lieu of SCZ stock in the transaction. Security Capital will not be obligated to proceed with the transaction should shareholder elections require cash payments in excess of $200 million.

In light of Luxembourg legal requirements, the transaction will be structured in two steps. Security Capital will exchange its stock and cash for assets of SC-U.S. Realty, followed by the repayment of SC-U.S. Realty’s line of credit and satisfaction and discharge of its convertible debentures. Shortly after the exchange, SC-U.S. Realty shareholders will receive a distribution of SCZ stock or cash.

As a consequence of the transaction, Security Capital is expected to receive increased annual dividends and interest of $154.5 million after the cancellation of the management agreement with SC-U.S. Realty. In addition, approximately $8 million of operating expenses will be permanently eliminated. On a pro forma basis as of June 30, 2000, Security Capital’s reported net asset value increases by 12.7 percent and cash flow from operations for the trailing four quarters increases by 22.4 percent to $1.04 per share. Total pro forma cash flow from operations for the same period increases 67.2 percent to $155.5 million. After the transaction, the pro forma fixed-charge coverage ratio per Security Capital’s line of credit is 2.68x, with a leverage ratio of 29.1 percent. This pro forma financial information is based on only the $200 million cash election amount provided for in the transaction agreement; it does not take into account the additional $250 million of SCZ share repurchases authorized by Security Capital’s board or the anticipated expense savings.

William D. Sanders, chairman of both Security Capital Group and SC-U.S. Realty, said, "This move will allow Security Capital to accelerate simplification of its structure and reduce the significant public market discount that exists in the stock prices of both companies today."

The transaction is subject to approval by the holders of two-thirds of SC-U.S. Realty shares, and the holders of a majority of the voting power of Security Capital shares, who cast votes at special shareholder meetings of each company, expected to take place early in the first quarter of 2001.

Security Capital owns 30,401,683 or 40.6 percent of outstanding SC-U.S. Realty shares and will vote its shares in favor of the transaction. The transaction is subject to review under United States antitrust rules, as well as by the Commission de Surveillance du Secteur Financier, the Luxembourg regulatory agency that has authority over SC-U.S. Realty, and is subject to other customary conditions to closing, including receipt of the necessary financing.

Any SC-U.S. Realty shareholders who vote against the transaction will have the option to receive SCZ common stock or up to $200 million in cash in a per-share amount equal to the average high and low trading price of the SCZ common stock for a 15 trading-day period that ends on the sixth trading day prior to the SC-U.S. Realty shareholder meeting, multiplied by 1.15. If cash elections amount to less than $200 million, the balance will be used by Security Capital to repurchase its own stock. U.S. shareholders of SC-U.S. Realty who receive SCZ stock or cash in the transaction will recognize gain or loss for U.S. tax purposes; tax treatment of non-U.S. shareholders will depend on the laws in their country of residence.

As part of the transaction, SC-U.S. Realty will use cash received from Security Capital to satisfy and discharge its obligations in respect of its outstanding 2 percent senior unsecured convertible debentures due 2003. Debenture holders are expected to receive cash equal to the full accreted value of the debentures in May 2001. Also in connection with the transaction, SC-U.S. Realty’s outstanding bank debt will be refinanced by Security Capital, which has arranged a $625 million acquisition facility to finance the transaction.

Goldman, Sachs & Co. advised Security Capital and Merrill Lynch & Co. Inc. advised the SC-U.S. Realty Special Committee in the transaction. The acquisition facility was arranged by Chase Securities Inc. and Wells Fargo Bank N.A.

Acquisitions, Developments & Dispositions
Spieker Develops Office Towers on San Francisco Peninsula ... The New York-based law firm of Weil, Gotshal & Manges has leased 101,000 square feet for a 15-year term in Spieker Properties’ new twin office buildings at The Towers at Shores Center, scheduled for completion in the fall of 2001.

Construction has already begun on The Towers, a project with an estimated cost of $113 million. The 340,000- square-foot office development is located in Redwood Shores, along the Highway 101 corridor midway between San Francisco and San Jose.

CenterPoint Announces $54 Million of Dispositions ... Oak Brook, Illinois-based CenterPoint Properties Trust recently completed dispositions consisting of four properties totaling 670,153 square feet and two land parcels totaling 20 acres. The combined proceeds from these sales is $54.1 million, bringing the company’s year-to-date dispositions to $127.7 million.

AMLI Residential and BPMT Acquire Austin Apartment Complex ... The recent purchase of the former Jefferson Scofield Ridge and Jefferson Scofield Farms 487-unit luxury apartment community in Austin, Texas, is the fifth and final property purchased under the previously announced first co-investment program between Chicago-based AMLI Residential Properties Trust and BPMT, a European pension fund.

Under the initial program, the two companies agreed to acquire approximately $165 million of institutional-quality multifamily communities within AMLI’s seven key markets in the Southeast, Southwest, and Midwest. Since the Austin purchase marks the final acquisition under the first program, AMLI and BPMT are ready to launch a second program with the goal of acquiring approximately $260 million of real estate.

AMLI and BPMT (Stichting Bedrijfspensioenfonds voor de Metaal en Technische Bedrijfstakken) each contributed 50 percent of the equity needed for the Jefferson Scofield purchase. Northwestern Mutual Life Insurance Company provided permanent loan financing for this acquisition with a 7.7 percent interest rate for a term of seven years, amortizable over a 30-year schedule.

Renamed AMLI at Scofield Ridge, the property is set on 32 acres near the intersection of MoPac and Parmer Lane. Construction of the community was completed earlier this year and contains 433,053 rentable square feet in 25 three-story buildings, of which 266 (55 percent) are one-bedroom, 203 (42 percent) are two-bedroom, and 18 (3 percent) are three-bedroom units. The average size of an apartment is 889 square feet. In addition, the community offers amenities such as a resort-style swimming pool and spa, a state-of-the-art fitness center, and a resident business center.

"Austin is one of the strongest apartment markets in the country and a core market in the AMLI portfolio. Employment growth, occupancy, and rent growth continue to exceed expectations," stated Allan Sweet, AMLI president. With this acquisition, AMLI now owns eight communities-a total of 3,388 apartments-in Austin.

The AMLI portfolio currently includes 60 apartment communities containing 23,714 apartments, with an additional 3,950 apartments under development or in lease-up in 14 locations.

Gables Sells Two Sugarloaf Phases, Focuses on In-Fill Development ... Placing its emphasis on in-fill locations-those the company defines as sub-markets where people pay the most on a per-square-foot basis to buy a single-family home-Gables Residential has sold its Sugarloaf Phases II and III land positions in Atlanta and will develop an apartment community on a portion of the site. Total sale proceeds were $13.7 million. Gables purchased the land in 1998 and had a total investment of $11.6 million. Under the new agreement, Gables will develop approximately 200 apartments on a third-party basis for the buyer.

"Sugarloaf continues to prosper with a prestigious reputation. However, the ability to harvest value and augment earnings through development was very compelling for our shareholders," stated Jordan Clark, Gables’ chief investment officer. "We plan to redirect capital earmarked for future development in Sugarloaf to more in-fill locations consistent with our strategic objectives," he added.

Gables Residential owns 80 communities with 23,860 completed apartments and has an additional 12 communities with 3,336 apartments under development or lease-up in key cities in Georgia, Texas, Tennessee, and Florida.

People & Places

AvalonBay Communities names new president ... Bryce Blair, a 15-year veteran of the company and currently its chief operating officer, will take on the additional role of president. Blair will oversee the execution of strategy and operations for the $5 billion REIT. Dick Michaux will remain chairman and CEO.

Andrew (Drew) Alexander promoted to CEO at Weingarten Realty ... In addition to assuming the CEO post, effective January 1 of next year, Alexander will continue to serve as president and as a member of the board. The current CEO, Stanford Alexander (and Drew’s father), remains chairman. Martin Dubrovner continues as vice chairman.

Parkway Properties creates new executive-level post ... This Jackson, Mississippi-based company has divided the responsibilities currently performed by Sarah P. Clark, its chief financial officer, and has appointed Clark to the newly created senior management position of senior vice president of administration and strategic planning. Clark will relinquish the duties of CFO effective November 1, 2000. The company has tapped Marshall Loeb, a former employee, as its new CFO.