Remember the era when it felt likehalf of all retail REITs were buying the other half?

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The result was the consolidation of enclosed mall ownershipamong just a handful of major companies, many of which have morerecently divested some of their holdings to smaller, private firms.The same was not true of smaller projects; despite the presence ofa few mega-companies like Kimco Realty,neighborhood center ownership remains quite fragmented.

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But maybe consolidation is starting up in this sector.Regency Centers has offered to acquireAmREIT for $22 per share in cash or stock (about$433 million), some $2 per share above the latter's all-time stockprice. The deal, if it goes through, would give Regency a muchlarger presence in Texas (including prominentareas in Houston) as well as additional propertiesin Georgia. AmREIT's portfolio was 97.6 percentoccupied as of the end of the first quarter, according to itsconference call, during which executives discussed their own plansto make targeted acquisitions. (AmREIT went public less than twoyears ago.)

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AmREIT may not agree that the deal is “an opportunity toleverage synergies,” according to the letter Regency ChairmanHap Stein sent to AmREIT Chairman H. KerrTaylor, and made public on Regency's website.

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“While we had hoped to be able to explore a potentialtransaction with AmREIT on a non-public basis, unfortunately todate you have declined our requests to share information andotherwise engage in the kind of process that would enable us tomove forward toward that end,” Stein wrote.

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That doesn't sound like a friendly merger to me. But the offerclearly is the latest in what may be a trend in the making.Kite Realty just closed its acquisition ofInland Diversified Real Estate Trust.

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There's plenty of opportunity for consolidation in this sector.But the Regency/AmREIT deal or lack thereof may be a harbinger asto whether deals will get done.

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What do you think?

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