Cerberus Agrees to Buy LNR Property

Private investor Cerberus Capital Management has agreed to buy real estate investment and management company LNR Property Corp. for $1.92 billion in cash.

Cerberus-backed Riley Property Holdings, a new company, would pay $63.10 a share for Miami Beach-based LNR, a 7% premium to its closing price of $59.10 on Friday on the New York Stock Exchange. Based on its share count as of May 31, that values the offer at $1.92 billion. Including debt and stock options, the deal is worth $3.8 billion.

LNR shares rose $3.71 to $62.81 on Monday on speculation that another bidder for the company may emerge. The agreement bars LNR from soliciting other proposals but permits it to consider unsolicited offers.

LNR, which was spun off from home builder Lennar Corp. in 1997, said late Sunday that Riley Property would be partly owned by LNR’s current management, including its controlling shareholder, Chairman Stuart Miller.

LNR Chief Executive Jeffrey Krasnoff would become CEO of Riley Property. LNR expects the deal to close by the end of this year or in early 2005.

The purchase is the second multibillion-dollar transaction proposed in the U.S. commercial real estate industry in two weeks. General Growth Properties Inc., the No. 2 owner of malls, this month agreed to buy Rouse Co. for $7.2 billion in cash.

New York-based Cerberus, with more than $14 billion in investment capital, was part of a group that last month agreed to acquire the Mervyn’s department store business from Target Corp. for $1.65 billion.

LNR finances, manages and develops commercial real estate. The company was part of a group that agreed this month to buy the 21-acre Fan Pier development site in Boston’s Seaport district from Hyatt Hotels Corp. for an undisclosed price.

LNR and Lennar bought Newhall Land & Farming Co. for about $1 billion this year, entitling them to build 20,000 homes as well as commercial properties north of Los Angeles.

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Reuters and Bloomberg News were used in compiling this report.