Report of Kite-WP Glimcher merger takes analysts by surprise

A report saying that Indianapolis-based Kite Realty Group Trust is in merger talks with fellow retail landlord WP Glimcher Inc. seems to have caught analysts who follow the commercial real estate industry off guard.

Reuters reported late Wednesday that the two real estate firms are considering combining operations, citing people familiar with the matter.

But Michael Bilerman, a real estate investment trust analyst with New York-based Citigroup Global Markets, said in a report that Citigroup doesn’t think a deal between the two makes sense, given Kite’s focus is on strip centers and WP Glimcher’s is on malls.

“However, we see a reasonable scenario that [Kite] might be a buyer of [Glimcher’s] strip center portfolio, which generates $140 million in annual net operating income,” Bilerman said in the report.

Bilerman said he met with Kite executives Wednesday evening in New York City at the National Association of Real Estate Investment Trusts conference, and they declined to comment directly on the report.

Bilerman also said WP Glimcher management at the conference gave “no indication that any deal to sell the company was in the works.”

Wall Street so far has been noncommittal to the news that a merger might be in the offing. As of late Thursday morning, shares of Kite had dropped 64 cents each, to $26.75 each. WP Glimcher shares dipped 10 cents each, to $11.29, after rising 8 percent in premarket trading.

Kite Realty, founded in 1960, has a $2.3 billion market value. Columbus, Ohio-based WP Glimcher has a market value of $2.1 billion.

WP Glimcher was formed early last year in a $4.3 billion merger of Washington Prime Group Inc. and Glimcher Realty Trust. Washington Prime was created in May 2014 when Indianapolis-based shopping mall giant Simon Property Group Inc. decided to spin off 98 mostly smaller properties into a separate publicly traded company.

WP Glimcher has an Indianapolis office at Chase Tower.