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Md. trust to be sold


First Washington Realty Trust Inc., the Bethesda-based owner of neighborhood shopping centers throughout the mid-Atlantic, including six in the Baltimore area, said yesterday it had agreed to sell the company to the nation's largest public pension fund for $800 million.

U.S. Retail Partners LLC, a joint venture of the California Public Employees' Retirement System and National Retail Partners LLC, will pay about $500 million in cash and assume about $300 million in debt to acquire the real estate investment trust.

Net proceeds from the sale - after paying debt, other liabilities and transaction expenses - should yield about $26 per share of common stock in cash, First Washington officials said. That would represent a 25.3 percent premium over the closing price of $20.75 on Wednesday and a 28 percent premium over the company's 52-week average close. Shares climbed $4.38 per share yesterday, closing at $25.13.

"Is it a fair price? I think so," said Merrill Ross, a managing director of real estate research for Friedman, Billings, Ramsey in Arlington, Va. "We had calculated the net asset value at $24 [per share], so we think $26 sounds good. It sounds like a nice deal."

Officials of First Washington, which carved its niche in neighborhood, supermarket-anchored shopping centers, had been frustrated that the stock barely budged from the $19.50 per share price it had in June 1994, when the company went public, Ross said.

"We're being offered a highly attractive price, but it's a fair price," said Stuart D. Halpert, chairman of First Washington, who started the company with President William J. Wolfe in 1983. "We believe as management that [the stock] is undervalued, and in this case it's reasonable. The transaction bears it out."

The deal was approved by a committee of independent directors and by the board of directors on Monday. The sale, which is expected to close in January, is subject to approval by First Washington stockholders and the limited partners of the company's operating partnership. Stockholders would get all cash for their stock, while operating partnership unit holders can get either cash or a mix of cash and a partnership interest.

Under the plan, the company will sell all its assets and merge into entities related to the California Public Employees fund.

Halpert and Wolfe will form a new private entity, using the name First Washington Management. That company, which will retain First Washington's 75 employees, will manage and lease the former First Washington Shopping Center properties, Halpert said.

When First Washington started, it managed and owned all types of commercial real estate, including office buildings, apartments and industrial sites. But it soon narrowed its focus and sold off everything but its neighborhood shopping centers.

Since going public in 1994, the company has quadrupled in size, from 20 properties valued at $200 million to 63 centers valued at $800 million, Halpert said.

The company's portfolio includes properties stretching from Richmond, Va., to southern New Jersey, with about 60 percent of the centers in the Baltimore-Washington region.

Its Baltimore area centers include the Festival at Woodholme in Pikesville, Northway Shopping Center in Millersville, Parkville Shopping Center, Southside Marketplace in South Baltimore, Valley Centre in Owings Mills and Elkridge Corners Shopping Center.

First Washington also has shopping centers in the Chicago area.

"This portfolio is in the middle of the strike zone for CalPERS' core real estate strategic plan," Michael Flaherman, chairman of the investment committee for California Public Employees' fund, said in a statement, adding that high quality centers in strong markets will enhance cash flow to the fund. Now, most of the real estate in the fund's portfolio is on the West Coast.

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