<PAGE> 1
TYPE: 425
SEQUENCE: 1
Description: Form 425
Filed by Pan Pacific Retail Properties, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Western Property Trust Properties, Inc.
Commission File No.: 001-08723
THE FOLLOWING IS THE SCRIPT OF A TELEPHONE CONFERENCE WITH INVESTORS HELD ON
TUESDAY, AUGUST 22, 2000 AT 11:00 AM PST:
Welcome to Pan Pacific Retail Properties conference call, announcing its
proposed acquisition of Western Properties Trust.
First I would like to read a Safe Harbor statement. Certain matters discussed
within this conference call are forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995. Although, the companies
believe the expectations reflected in such forward-looking statements are based
on reasonable assumptions, it can give no assurance that these expectations will
be attained. Factors that could cause actual results to differ materially from
expectations include the potential G&A cost savings from the transaction, future
earnings growth of the combined company, the successful integration of the
businesses of Western and Pan Pacific, and other risks which are detailed from
time to time in each company's reports filed with the Securities and Exchange
Commission, including each company's Annual Report on Form 10-K for the year
ended December 31, 1999.
At this time, I would like to introduce Stuart Tanz, President and Chief
Executive Officer of Pan Pacific.
STUART TANZ:
Thank you and good day everyone. With me here is Joe Tyson, Pan Pacific's Chief
Financial Officer and Jeff Stauffer our Chief Operating Officer. Also, Brad
Blake, Chairman and CEO of Western, is on the line from San Francisco.
We are very pleased to announce that Pan Pacific has entered into a definitive
agreement to acquire Western Properties Trust through a stock-for-stock
transaction valued at approximately $440 million.
This acquisition will firmly position Pan Pacific as the largest neighborhood
shopping center REIT on the West Coast ...... and the fourth largest in the
country ...... with 110 properties totaling over 14 million square feet.
This is truly a defining moment for Pan Pacific.
<PAGE> 2
In one move ...... we will achieve five major strategic objectives, dramatically
advancing the company.
First ...... it creates a much stronger company, significantly enhancing our
market presence in the best markets on the West Coast.
Second ...... it dramatically increases our public float and capital market
presence;
Third ...... it is immediately accretive to earnings;
Fourth ...... it strengthens our balance sheet and financial flexibility;
And fifth...it provides the opportunity to achieve significant operational
tenant synergies going forward.
I would like to discuss the first two points in detail, and then ask Joe to
outline the terms of the transaction, and to address its positive impact on our
earnings and balance sheet. Then Jeff will discuss the transaction's
operational, leasing and integration attributes.
Starting with our market presence ...... The Western portfolio is a perfect
strategic fit for Pan Pacific. The vast majority of Western's shopping centers
are located in Northern California ...... and within that region ...... 75% of
their properties are concentrated in the San Francisco and Sacramento markets
...... two of the strongest markets on the West Coast.
Over the past 3 years, Brad and his team have done an excellent job improving
the quality of the Western portfolio and its growth prospects by selling the
majority of Western's single-tenant properties and shopping centers located in
the Central valley ...... and then redeploying that capital in the higher-growth
San Francisco, Sacramento and Portland markets. Combining Western's properties
with our centers positions Pan Pacific as the largest owner and operator, by
far, in these key markets.
The Western portfolio fits our disciplined criteria of acquiring dominant
grocery-anchored centers located in strong ... in-fill markets; with the
opportunity to increase cash flow and shareholder value through implementing our
management and leasing programs. In fact, Western's portfolio and the
opportunities for increased value, are very similar to the $425 million of
"one-off" shopping centers we have acquired since our IPO three years ago.
Western's properties are in markets in which we have operated for many years
...... we know the centers very well ...... and we have the infrastructure
in-place to easily integrate their assets into our portfolio.,
In terms of the capital markets ...... upon completion of this transaction, we
will issue approximately 11 million common shares to Western shareholders,
substantially increasing our public float from 21 million shares to
approximately 32 million shares. As a result, Pan Pacific's total market cap
will be approximately $1.3 billion.
Western's shareholder base is predominantly individual retail investors, while
Pan Pacific's is mostly institutional. With the transaction, our largest
shareholder, Revenue Properties, who owns 51% of our stock, will be diluted down
to approximately 31%. And, with our increased
2
<PAGE> 3
market cap surpassing the $1 billion mark, along with having greater public
float and a more diverse investor base, Pan Pacific will benefit from increased
visibility, liquidity, and financial flexibility.
As part of the transaction, Pan Pacific will be forming a joint venture with
Western management to complete Western's three retail development projects. Two
of the projects are currently under construction, and one is in the entitlement
process. Brad and his team have done a terrific job in putting the projects
together, lining up high quality tenants and coordinating the development. Given
the status of the projects and the close relationships Brad has established with
the cities and tenants involved in each deal, we felt it was important for his
team to see the projects through to completion. The two projects under
construction, which total about $75 million, should be completed over the next
12 to 24 months at an average yield of about 10.5 to 11% which will add nicely
to our earnings in 2002.
And now Joe will discuss the details of the transaction.
JOSEPH TYSON
Thanks Stuart. The transaction is being structured as a tax-free,
stock-for-stock exchange in which Western common shares will be exchanged for
newly issued Pan Pacific common shares based upon a fixed exchange ratio of .62
Pan Pacific share for each Western share. As a result, we will be issuing
approximately 11.7 million shares and units to Western shareholders,
representing a 34% pro forma interest in Pan Pacific, on a fully diluted basis.
Based upon Pan Pacific's closing price yesterday of $20 and 9/16ths .... this
would value Western's equity at $240 million.
Pan Pacific will use $65 million from its unsecured line of credit to retire
Western's bank line and to pay transaction expenses. In addition, Pan Pacific
will assume Western's $125 million of investment-grade bonds and one $10 million
mortgage. All totaled, the value of the transaction is approximately $440
million.
As part of the transaction, Pan Pacific has agreed to increase its quarterly
dividend from 42 cents a share to 45.5 cents a share starting in the first full
quarter following the closing of the deal. We expect to close in the fourth
quarter, so the dividend will be raised starting in the first quarter next year.
Based upon the .62 exchange ratio, the 45.5 cent dividend equates to Western's
current quarterly dividend of 28 cents a share. While this dividend increase is
slightly higher than our traditional annual increase, our pro forma pay out
ratios will remain roughly the same as our current run rate.
With respect to our earnings and cash flow, we expect the transaction to be
accretive to the 2001 consensus estimate by about 2%. In arriving at this
number, we've utilized conservative assumptions in terms of leasing activity, as
well as G&A savings of approximately $3 million, while maintaining our current
debt ratios.
In terms of the going-in yield, the transaction value of $440 million equates to
a first year NOI cap rate of approximately 11.6% on a GAAP basis and 11.5% on a
cash basis. Looking ahead to 2002, we expect to increase the NOI yield by 50 to
75 basis points by increasing Western's
3
<PAGE> 4
current occupancy to be in line with our 97 to 98% run rate ..... and by
achieving other leasing and operating efficiencies.
In terms of NAV, the transaction, with the exchange ratio, represents the
approximate relationship in the net asset value between the two companies.
One of the key benefits of the transaction is that it enhances our financial
flexibility and key ratios. Western's debt structure and investment-grade rating
fits hand-in glove with ours. 95% of Western's debt is unsecured, including $125
million of investment grade bonds, which Pan Pacific will be assuming, and
approximately $65 million of bank debt, which will be replaced. This will
substantially enhance Pan Pacific's unsecured debt-to-total debt ratio from
approximately 40% to 60%, a key rating agency measure. And, as you may have
seen, S&P and Moody's have reaffirmed both Pan Pacific's and Western's
investment grade rating.
The Western bonds have a 7.5% weighted average interest rate and a weighted
average maturity of 6.2 years. Both the average rate and maturity on the bonds
are generally consistent with Pan Pacific's existing permanent, fixed-rate debt.
Our interest coverage ratio will remain at approximately 3 times, and our
percentage of unencumbered NOI will increase from 58% to 73%.
In terms of our line of credit, we are currently in discussions with our lead
bank to increase our unsecured line from $250 million to $400 million. The
increased line amount will enable us to execute our business plan over the next
several years without any additional capital needs.
With that I'll turn it over to Jeff.
JEFFREY STAUFFER:
Thanks Joe. Let me start by echoing Stuart's remarks regarding Northern
California. After closing we will own 46 properties totaling 5.5 million square
feet in Northern California, of which over 70% will be located in the San
Francisco and Sacramento markets. In the San Francisco Bay Area we will own 26
properties totaling 2.6 million square feet, the majority of which are located
in the densely populated, high-income East Bay area. In the Sacramento market we
will own 10 properties totaling 1.3 million square feet. The growth prospects in
both of these markets continue to be very strong, especially in Sacramento,
where the population is growing at a rate which is nearly twice the national
average.
In terms of tenant diversification, the transaction significantly increases our
tenant base from 1,400 to over 2,100 tenants. Approximately 300 of Western's
tenants, representing 65% of their total square footage, are presently Pan
Pacific tenants. This should significantly enhance our relationships and provide
for greater multi-lease, multi-market transactions.
After closing, our largest tenant will be Raley's Supermarket, which will
account for 5.9% of our base rent. Raley's is a financially strong Northern
California supermarket chain, currently operating 149 stores ..... generating
annual revenues approaching $3 billion.
4
<PAGE> 5
It is the 10th largest private employer in California, and is the number one
supermarket chain in Sacramento with a 25% market share, and the third largest
in the San Francisco area with a 7% market share.
We are in the process of developing a comprehensive business plan integrating
Western's properties into our portfolio. Pan Pacific's existing regional
infrastructure in Northern California, Oregon and Nevada have the capacity to
absorb these centers. Furthermore, both companies utilize similar accounting and
property management systems, and each company has the same auditor. All of this
will enable us to efficiently integrate the properties upon closing.
Over the next 12 to 24 months approximately 600,000 square feet will expire in
the Western portfolio and we are already exploring re-tenant opportunities.
Based on the strength of the market, and our ability to aggressively work with
tenants, we expect to achieve double-digit growth in re-leasing rates. We also
plan to re-lease space ahead of scheduled expirations as we routinely do with
our own portfolio. There is also a great opportunity to increase cash flow by
improving Western's expense recovery ratio from its current level of
approximately 87% to be in-line with Pan Pacific's current rate of 92%.
We have extensively toured and surveyed each asset in Western's portfolio, and
as Stuart indicated, overall the properties are very consistent with our
portfolio, and they are very well maintained. Only a handful of assets require
some of our "3-R" work, which we will implement shortly after we close.
In summary, the Western assets are a perfect complement to Pan Pacific's
portfolio ..... the same strong markets ..... the same type of dominant shopping
center in the community ...... the same strong, grocery anchor and daily
necessity focus ...... and the same type of strong cash flow growth
opportunities.
With that I'll turn it back to Stuart.
STUART TANZ:
Thanks Jeff. Now I would like to turn the call over to Brad Blake at Western for
his comments. Brad?
BRAD BLAKE:
Thanks Stuart. Let me start by saying that we are very pleased with this
transaction and what it represents going forward for Western shareholders. After
exhaustive analysis over the past nine months of strategic alternatives to
maximize shareholder value, our board unanimously agreed that this transaction
was in the best interest of our shareholders.
We are extremely impressed with Pan Pacific's operating philosophy, high-quality
portfolio and consistently strong financial results. In addition, with Pan
Pacific's increased dividend, Western shareholders will continue to enjoy the
same dividend they receive now and will have the opportunity to achieve superior
growth and value through Pan Pacific's geographic and tenant diversification and
their strong market leadership on the West Coast. As Stuart, Joe and Jeff have
discussed, the compatibility of the two companies portfolios, as well as our
balance sheets
5
<PAGE> 6
and shareholder bases, create a situation where one-plus-one truly equals more
than two, and is truly a win-win situation for both companies.
All of us at Western have enjoyed working with Stuart and his team in putting
this transaction together and we are looking forward to continuing to work
closely with Pan Pacific over the next several months in terms of fully
integrating our systems and properties with theirs.
Stuart?
STUART TANZ:
Thanks Brad, we appreciate your comments and certainly share in your enthusiasm
for the transaction and have enjoyed working with you, Dennis, and your entire
team.
Before opening up the call for your questions, I would like to add a couple of
additional comments.
First, the transaction has been approved by each company's board. And Pan
Pacific's largest shareholder, Revenue Properties has agreed to vote all of its
Pan Pacific stock, representing 51% of our outstanding common stock, in favor of
the transaction. As Joe indicated, we expect to close in the fourth quarter.
In addition, Pan Pacific will expand its board to seven directors adding two of
Western's existing independent directors, which will make five of our seven
directors independent.
[P A U S E]
Finally ......
We firmly believe that this transaction provides the company with the platform
and opportunities where we can truly demonstrate:
- The benefits of our focused and disciplined strategy,
- The benefits of owning quality centers in strong markets where we have
operated successfully for many years,
- And ..... the benefits of our hands-on philosophy of continuously
working the assets and tenant base to achieve exceptional results.
And with our enhanced financial position, we look forward to capitalizing on the
multitude of opportunities this transaction offers, both on the property level
and the strategic level as this now positions Pan Pacific as the leading West
Coast shopping center REIT.
With that, we would be delighted to address any questions you may have.
6
<PAGE> 7
CLOSING REMARKS:
STUART TANZ:
Thank you for joining us today. As always, we appreciate your participation and
support. Jeff, Joe and I are available to answer any questions ...... as is Brad
and his team. So, please feel free to contact anyone of us.
Thank you again and good day.
THE FOLLOWING IS THE PRESS RELEASE DISSEMINATED BY PAN PACIFIC RETAIL
PROPERTIES, INC. AND WESTERN PROPERTIES TRUST ON AUGUST 22, 2000:
7
<PAGE> 8
PAN PACIFIC RETAIL PROPERTIES TO ACQUIRE
WESTERN PROPERTIES TRUST
TRANSACTION WILL CREATE LARGEST WEST COAST
NEIGHBORHOOD SHOPPING CENTER REIT
HIGHLIGHTS
SAN DIEGO--(BUSINESS WIRE)--Aug. 22, 2000-- -- Stock for stock transaction with
each Western share exchanged
for 0.62 Pan Pacific share
o Total transaction value of $440 million
o Increases Pan Pacific's total market capitalization by 55% to $1.3
billion
o Expected to be accretive to Pan Pacific stockholders in 2001
o Pan Pacific to increase quarterly dividend from $0.42 per share to
$0.455 per share
o Increases Pan Pacific's portfolio by 83% from 60 properties to 110
totaling 14.3 million sq. ft.
o Significantly enhances Pan Pacific's presence in key West Coast growth
markets
o Diversifies and increases Pan Pacific's tenant base by 50% to 2,100
retailers
o Enhances Pan Pacific's balance sheet, financial flexibility and key
coverage ratios
o Increases Pan Pacific's share base by 50% from 21.3 million common
shares to 32.0 million
o Provides opportunity to realize efficiencies including an anticipated
$3 million in G&A savings
o Respective boards of directors have unanimously approved the
transaction
o Pan Pacific's largest stockholder, holding 51%, has agreed to vote in
favor of the transaction
Pan Pacific Retail Properties, Inc. (NYSE:PNP - news) and Western Properties
Trust (AMEX:WIR - news) today announced that they have entered into a definitive
agreement in which Pan Pacific will acquire Western. Once the transaction is
completed, Pan Pacific will be the largest West Coast neighborhood shopping
center real estate investment trust (REIT), with an expected total market
capitalization of approximately $1.3 billion. Pan Pacific will own and operate
110 neighborhood shopping centers, encompassing more than 14.3 million square
feet, with a broad geographic representation in key West Coast growth markets.
"The transaction will create a unique and powerful platform for growth and
increasing shareholder value," stated Stuart Tanz, President and Chief Executive
Officer of Pan Pacific. "The Western portfolio provides an exceptional strategic
fit and is a perfect complement to our existing geographic locations. The
transaction will substantially strengthen our position in high barrier-to-entry
growth
-1-
<PAGE> 9
markets such as San Francisco, Sacramento and Portland. The Western portfolio is
consistent with the $425 million one-off properties that Pan Pacific has
acquired since our IPO three years ago. It features high-quality,
grocery-anchored centers located in strong, infill markets providing the
opportunity to enhance cash flow and value through implementing Pan Pacific's
proven management, marketing and leasing programs." Mr. Tanz also commented,
"Stockholders will benefit from anticipated stronger earnings growth and a
greater diversification of assets and tenants. The transaction will enhance Pan
Pacific's liquidity, presence and visibility in the capital markets and will
position Pan Pacific as the leading consolidator of shopping centers on the West
Coast."
Bradley Blake, Chairman, President and CEO of Western commented, "We are very
pleased with the proposed transaction. The Western board conducted an extensive
exploration of strategic alternatives and unanimously concluded that this
transaction is in the best interest of our shareholders. We firmly believe that
Pan Pacific will provide Western shareholders the opportunity to realize
superior growth and enhanced value as they participate in the benefits of
greater size, geographic and tenant diversification, liquidity and market
leadership. In addition, with Pan Pacific increasing its dividend in 2001,
Western's shareholders will continue to receive the same dividend they receive
now."
TRANSACTION TERMS
The transaction values Western at approximately $440 million including
transaction costs and the assumption of approximately $200 million of debt. It
is being structured as a tax free, stock for stock exchange whereby Western
common shares will be exchanged into newly issued Pan Pacific common shares,
based upon a fixed 0.62 exchange ratio. As a result, Pan Pacific will issue
approximately 11.7 million common shares and units to Western's equity holders,
representing a 34% pro forma interest in Pan Pacific on a fully diluted basis.
Pan Pacific will use approximately $65 million under its unsecured line of
credit to retire Western's bank line and to pay transaction costs. In addition,
Pan Pacific will assume Western's $125 million senior notes and a $10 million
mortgage. The transaction will be accounted for as a purchase of Western by Pan
Pacific.
Pursuant to the terms of the definitive agreement, Pan Pacific will increase its
quarterly dividend from $0.42 per share to $0.455 per share ($1.82 per share on
an annualized basis), commencing in the first full quarter following the closing
of the transaction. Based upon the fixed 0.62 exchange ratio, the $0.455 per
share dividend equates to Western's current quarterly dividend.
Upon completion of the transaction, Pan Pacific will expand its Board of
Directors to seven members, adding two of Western's existing independent members
from its Board of Trustees. With these additions, five of the seven Pan Pacific
board members will be independent.
Pan Pacific will continue to be led by its existing management team including
Stuart Tanz as President and Chief Executive Officer, Joe Tyson as Chief
Financial Officer and Jeff Stauffer as Chief Operating Officer. Upon completion
of the transaction, Pan Pacific intends to enter into a joint venture with
certain senior executives of Western, led by Bradley Blake, to complete
Western's three retail development projects currently in progress.
The transaction has been unanimously approved by each company's board of
directors and is expected to be completed in the fourth quarter of 2000, subject
to approval by each company's stockholders. Pan Pacific's largest stockholder,
Revenue Properties Company Limited, has agreed to vote its 10.8 million Pan
Pacific shares (representing 51% of Pan Pacific's total common shares) in favor
of the transaction. Upon completion of the transaction, Revenue Properties' 10.8
million shares will represent an approximate 31% pro forma interest in Pan
Pacific on a fully diluted basis.
Prudential Securities Incorporated is acting as the financial advisor for Pan
Pacific, and Donaldson, Lufkin & Jenrette is acting as the financial advisor for
Western.
-2-
<PAGE> 10
PORTFOLIO SUMMARY
The transaction joins two high-quality neighborhood shopping center portfolios,
with similar profiles and potential operating synergies. Western's strong,
leading position in Northern California, its focus on grocery-anchored centers
and its diverse tenant base complements Pan Pacific's portfolio. Upon completion
of the transaction, Pan Pacific will own and operate 110 centers encompassing
approximately 14.3 million square feet predominantly located in five West Coast
markets.
<TABLE>
<CAPTION>
Pan Pacific Western(1)
--------------------------- ---------------------------
Sq. Ft. (000s) % of Total Sq. Ft. (000s) % of Total
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Northern California 1,717 18% 3,816 77%
Southern California 1,944 21% 0 0%
Oregon 1,985 21% 463 9%
Washington 1,776 19% 128 3%
Nevada 1,458 16% 569 11%
Other 481 5% 0 0%
Total Portfolio 9,361 100% 4,976 100%
<CAPTION>
Pro Forma Pan Pacific
---------------------------
Sq. Ft. (000s) % of Total
-------------- ----------
<S> <C> <C>
Northern California 5,533 39%
Southern California 1,944 14%
Oregon 2,448 17%
Washington 1,904 13%
Nevada 2,027 14%
Other 481 3%
Total Portfolio 14,337 100%
</TABLE>
------------
(1) Pro Forma for transaction incorporating dispositions expected to be
completed by transaction closing.
With the inclusion of Western's Northern California portfolio, Pan Pacific will
become the largest owner and operator of neighborhood centers in the region,
including the densely populated San Francisco market, and the high-growth
Sacramento market. Specifically, Pan Pacific will own 33 centers, encompassing
4.0 million square feet in these two strong markets.
<TABLE>
<CAPTION>
Pan Pacific Western(1)
--------------------------- ---------------------------
Sq. Ft. (000s) % of Total Sq. Ft. (000s) % of Total
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
San Francisco Bay Area 1,072 62% 1,575 41%
Sacramento 275 16% 1,055 28%
Central Valley 0 0% 316 8%
Other N. California Markets 370 22% 870 23%
Total Northern California 1,717 100% 3,816 100%
<CAPTION>
Pro Forma Pan Pacific
---------------------------
Sq. Ft. (000s) % of Total
-------------- ----------
<S> <C> <C>
San Francisco Bay Area 2,647 48%
Sacramento 1,330 24%
Central Valley 316 6%
Other N. California Markets 1,240 22%
Total Northern California 5,533 100%
</TABLE>
------------
(1) Pro Forma for transaction incorporating dispositions expected to be
completed by transaction closing.
-3-
<PAGE> 11
TENANT SUMMARY
The transaction significantly broadens and further diversifies Pan Pacific's
strong tenant base. Upon completion of the transaction, Pan Pacific's tenant
base will increase from 1,400 retailers to over 2,100, and approximately 80% of
the total GLA will be leased to national and regional retailers. Approximately
300 of Western's tenants (65% of Western's GLA) are existing Pan Pacific
tenants.
After closing, Pan Pacific's largest tenant will be Raley's Supermarket, a
leading supermarket chain in Sacramento (ranked No. 1 with a 25% market share)
and San Francisco Bay Area (ranked No. 3 with a 7% market share). Raley's will
account for approximately 6% of Pan Pacific's pro forma annualized base rent.
<TABLE>
<CAPTION>
Pan Pacific Western(1)
----------------------- ----------------------
Rent Rent
($000s) % of Total ($000s) % of Total
--------- ---------- --------- ----------
<C> <C> <C> <C> <C>
Raley's Supermarket $ 339 0.4% $7,359 16.8%
Wal-Mart 2,836 3.3% 775 1.8%
Von's/Safeway 2,084 2.4% 1,339 3.1%
Albertson's/Sav-on 3,277 3.8% 0 0.0%
Rite Aid 1,576 1.8% 1,210 2.8%
Hollywood Video 1,187 1.4% 565 1.3%
Ross Stores 1,072 1.2% 628 1.4%
Save Mart 512 0.6% 1,121 2.6%
QFC 541 0.6% 1,090 2.5%
24 Hour Fitness 1,246 1.4% 243 0.6%
Office Max 1,481 1.7% 0 0.0%
<CAPTION>
Pro Forma Pan Pacific
-----------------------------
Rent
($000s) % of Total
------- ----------
<S> <C> <C>
Raley's Supermarket $7,698 5.9%
Wal-Mart 3,611 2.8%
Von's/Safeway 3,423 2.6%
Albertson's/Sav-on 3,277 2.5%
Rite Aid 2,786 2.1%
Hollywood Video 1,752 1.3%
Ross Stores 1,700 1.3%
Save Mart 1,633 1.3%
QFC 1,631 1.3%
24 Hour Fitness 1,489 1.1%
Office Max 1,481 1.1%
</TABLE>
------------
(1) Pro Forma for transaction incorporating dispositions expected to be
completed by transaction closing.
Jeff Stauffer, Chief Operating Officer of Pan Pacific stated, "We are already
underway with developing our business plan for integrating the Western
properties into our portfolio. To our strong advantage, Pan Pacific already has
regional offices in Northern California, Oregon and Nevada, each with the
infrastructure and systems in place to operate the assets without any additional
offices needed. Furthermore, both companies use similar accounting and property
management systems and both companies have the same audit firm. All of this will
enable us to seamlessly integrate the
-4-
<PAGE> 12
Western portfolio and generate meaningful efficiencies upon closing." Mr.
Stauffer also added, "With two-thirds of the Western portfolio leased to
existing Pan Pacific tenants, we can offer retailers an unsurpassed range of
property and market opportunities. There are strong tenant synergies between the
two companies and our leasing team is exploring these and other re-tenanting
opportunities. With our proven track record of aggressively enhancing our tenant
base, we expect to generate the same level of double-digit growth in re-leasing
rates with the Western portfolio as we have achieved with our own portfolio."
FINANCIAL SUMMARY
With the issuance of 11.7 million common shares, Pan Pacific's common share base
will be increased to approximately 32.0 million common shares. In addition to
increasing market capitalization and liquidity, the transaction is expected to
enhance Pan Pacific's financial flexibility. Upon completion of the transaction,
Pan Pacific will assume Western's $125 million of investment grade rated bonds
(7.5% weighted average interest rate), substantially enhancing Pan Pacific's
unsecured debt-to-total debt ratio from 40% to approximately 60% on a pro forma
basis and lowering its average borrowing cost. Pan Pacific's percent of
unencumbered net operating income is expected to increase from 58% to
approximately 73% on a pro forma basis and its interest coverage will remain
approximately 3-to-1.
Pan Pacific is currently in discussions with its lead bank regarding an increase
to its unsecured credit line from $250 million to $400 million.
Joe Tyson, Chief Financial Officer of Pan Pacific noted, "Based upon the $440
million transaction value, we expect the net operating income yield in the first
year will be over 11%. As a result of this strong yield, together with
anticipated G&A savings of approximately $3 million, we expect the transaction
to be accretive in the first year to our funds from operation per share. This
transaction represents the approximate relationship in net asset value between
the two companies." Mr. Tyson also commented, "Given the stock issuance and the
fact that Western's debt ratio is consistent with ours, the transaction is
balance sheet neutral to Pan Pacific. Furthermore, Pan Pacific's debt, including
its unsecured credit line, along with its investment-grade rating, complements
Western's financial structure and investment-grade rating. Going forward, Pan
Pacific will not only be significantly larger, but also financially stronger
with greater balance sheet flexibility. With a pro forma total market
capitalization in excess of $1 billion, and much greater liquidity, Pan Pacific
should attract new investors. Additionally, each company enjoys a uniquely
complementary shareholder base with Pan Pacific being predominately held by
institutions, while Western is primarily held by individual retail investors."
CONFERENCE CALL
Pan Pacific will conduct an investor conference call on Tuesday, Aug. 22, 2000
at 2:00 p.m. Eastern Time to discuss its proposed acquisition of Western.
Stockholders and interested parties may participate in this conference call by
dialing 877/282-0743. A replay will be available at 888/266-2081, pass code
4536498.
ABOUT PAN PACIFIC RETAIL PROPERTIES
Pan Pacific Retail Properties, Inc. is an equity real estate investment trust
(REIT) traded on the New York Stock Exchange under the symbol PNP. The Company
creates long-term stockholder value by specializing in the acquisition,
ownership and management of community and neighborhood shopping centers for
everyday essentials. Pan Pacific's strategy is aimed at providing stockholders
with long-term stable cash flow through maintaining a diverse portfolio and
tenant base, balanced with consistent growth through implementing its
acquisition and property management programs.
The Company's portfolio currently totals 60 properties, encompassing 9.4 million
square feet, and is
-5-
<PAGE> 13
98% leased to over 1,400 retailers. The portfolio is diversified across five
Western U.S. markets: Northern California, Southern California, Washington,
Oregon and Nevada.
Pan Pacific is a full service real estate company with in-house expertise in
acquisitions, leasing, development, property management, marketing and
accounting. The Company is headquartered in Vista (San Diego) California, and
has five regional offices located in Sacramento, California; Chino, California;
Kent, Washington; Portland, Oregon; and Las Vegas, Nevada.
ABOUT WESTERN PROPERTIES TRUST
Western Properties Trust owns and operates community and neighborhood shopping
centers in the Western United States. The company has investments in 57
properties, primarily anchored by supermarkets, containing approximately 5.3
million square feet of gross leasable area. The corporate office of the
self-administered equity real estate investment trust is in Emeryville,
California. Its shares are traded on the American Stock Exchange under the
symbol "WIR."
Certain matters discussed within this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward looking statements relate to matters such as the future
operating results of Pan Pacific and Western, the potential G&A cost savings
from the transaction, future earnings growth of the combined company, the
successful integration of the businesses of Western and Pan Pacific, and the
ability of the combined company to obtain equity and debt financing. Such
forward looking statements are based on the beliefs of Pan Pacific's and
Western's management as well as assumptions made by and information currently
available to each company's management. The words "anticipate," "believe,"
"may," "expect," "will," and similar expressions, variations of such terms or
the negative of such terms as they relate to Pan Pacific or Western used in this
press release, are intended to identify such forward looking statements.
Although the companies believe the expectations reflected in such
forward-looking statements are based on reasonable assumptions, they can give no
assurance that its expectations will be attained. Factors that could cause
actual results to differ materially from the companies' expectations include
market valuations of their stock, financial performance and operations of their
shopping centers, real estate conditions, execution of shopping center
development programs, successful completion of renovations, completion of
pending acquisitions including the completion of customary due diligence and
closing conditions, changes in the availability of additional acquisitions,
changes in local or national economic conditions, and other risks detailed from
time to time in reports filed with the Securities and Exchange Commission
including each company's Annual Report on Form 10-K for the year ended December
31, 1999.
Contact:
Pan Pacific Retail Properties, Inc.
Carol Merriman, 760/727-1002 ext. 102
(Investor Relations)
or
Western Properties Trust
Dennis Ryan, 888/831-5770
(Chief Financial Officer)
The foregoing communication contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements are those that
do not state historical facts and are inherently subject to risk and
uncertainties. The forward-looking statements contained herein are based on
current expectations and entail various risks and uncertainties that could cause
actual results to differ materially from those projected in the forward-looking
statements. Such risks and uncertainties include, among others, risks
associated with completion of the merger, risk associated with integration of
the two companies' businesses, risks associated with the market valuations of
each company's stock, the financial performance and operations of their shopping
centers, real estate conditions, execution of shopping center development
programs, successful completion of renovations, completion of pending
acquisitions including the completion of customary due diligence and closing
conditions, changes in the availability of additional acquisitions, changes in
local or national economic conditions, and other factors discussed in each
company's Annual Report on Form 10-K.
Investors and security holders of both Pan Pacific and Western are urged to read
the joint proxy statement/prospectus regarding the business combination
transaction referred to in the foregoing information, when it becomes available,
because it will contain important information. The joint proxy
statement/prospectus will be filed with the Securities and Exchange Commission
(the "Commission"). Pan Pacific and Western security holders may obtain a free
copy of the joint proxy statement/prospectus (when it is available) and other
documents filed by Pan Pacific and Western with the Commission at the
Commission's Web site at www.sec.gov. The joint prospectus and these other
documents may also be obtained free of charge from Pan Pacific by directing a
request to Pan Pacific Retail Properties, Inc., 1631-B Melrose Drive, Vista,
California 92083, Attention: Joseph B. Tyson, Executive Vice President, Chief
Financial Officer and Secretary, telephone: (760) 727-1002; or from Western by
directing a request to Western Properties Trust, 2200 Powell Street, Suite 600,
Emeryville, California 94608, Attention: Dennis Ryan, Chief Financial Officer,
telephone: (888) 831-5770.
Pan Pacific and its officers and directors may be deemed to be participants in
the solicitation of proxies from Pan Pacific's stockholders with respect to the
proposed merger and related transactions. Information regarding such officers
and directors is included in Pan Pacific's Proxy Statement for the 2000 Annual
Meeting of Stockholders filed with the Commission on March 30, 2000. This
document is available free of charge at the Commission's Web site at www.sec.gov
and from the Pan Pacific contact referred to above. Western and its officers
and directors may be deemed to be participants in the solicitation of proxies
from Western's shareholders with respect to the proposed merger and related
transactions. Information regarding such officers and directors is included in
Western's Proxy Statement for the 2000 Annual Meeting of Shareholders filed with
the Commission on March 30, 2000. This document is available free of charge at
the Commission's Web site at www.sec.gov and from the Western contact referred
to above.
-6-
