Shopping mall owner Equity One expands into California with $600M Capital and Counties deal

Equity One moves west with Capital Shopping deal

NORTH MIAMI BEACH, Fla. — Shopping mall owner Equity One Inc. says it will buy Capital Shopping Centres’ U.S. unit in a $600 million joint venture deal that will make Northern California the company’s No. 2 market after South Florida.

Capital and Counties USA Inc. owns a portfolio of 15 California properties totaling 2.6 million square feet, including 70 percent retail assets mainly concentrated in the San Francisco Bay Area and 30 percent office and multifamily properties. The retail portfolio was 83 percent leased as of April 30, the companies said.

Britain’s Capital Shopping will receive about 4.1 million shares of Equity One, worth $70.6 million based on the stock’s Friday closing price, and 10.9 million joint venture units. The units may be redeemed for Equity One stock on a one-for-one basis, or for cash. CEO David Fischel will join Equity One’s board.

Equity One will assume about $330 million in mortgage debt under terms of the transaction. It intends to dispose of most of the non-retail assets.

“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,” said Jeff 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.”

Turner Newton, who has been CEO of C&C USA since 1994, will continue to lead the business for Equity One. The company said it plans to retain most of C&C USA’s operating, acquisition and asset management teams.

The transaction is expected to close late in the third quarter and add modestly to funds from operations in the first year after closing, excluding one-time expenses. Equity One backed its prior outlook for 2010 funds from operations, before merger expenses, of $1 to $1.08 per share.

Eastdil Secured acted as financial adviser to Equity One. Bank of America Merrill Lynch advised Capital Shopping Centres.

Equity One shares rose 3 cents to $17.25 in midday trading.