S&P Affrms Rtgs on Pan Pacific and Western Properties.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Aug. 22, 2000--Standard & Poor's today affirmed its triple-'B'-minus corporate credit ratings on Pan Pacific Retail Properties Inc. and Western Properties Trust following the announcement of a proposed stock-for-stock merger. The outlook for both companies is stable.

The proposed stock-for-stock merger will result in Western's being merged into Pan Pacific, and $125 million in public unsecured debt is affected.

Under the terms of the merger agreement, each outstanding Western share will be converted into 0.62 Pan Pacific share, an estimated 3% premium to Western's current share price. In addition, Pan Pacific will assume $125 million of Western's senior notes and $10 million of mortgage debt. Pan Pacific will retire Western's bank line with a borrowing under its own line. The combined company will be run by Pan Pacific's existing management team. The transaction is contingent upon the approval of a simple majority of the shareholders of both companies.

While remaining concentrated in the western states of California, Oregon, Washington, and Nevada, the combined company will benefit from a significantly larger portfolio and enhanced market position. This combination will create the largest West Coast neighborhood shopping center REIT, with about 110 properties and 2,100 tenants. However, there is some concern regarding the possible dilution of asset quality in Pan Pacific's portfolio.

Conservative balance sheets and financial ratios are expected to be maintained. On a combined basis, book-value leverage will remain under 50%. Debt service coverage, which includes capitalized interest, will remain strong at about 2.5 times. Financial flexibility is expected to benefit from a combined pool of properties that will be 72% unencumbered.

The Southern California-based Pan Pacific is a fully integrated equity REIT that owns and manages predominantly grocery-anchored neighborhood and community shopping centers. Pan Pacific's corporate credit rating reflects the company's high-quality, stable assets, and conservative financial measures. However, these strengths have been partially offset by geographic concentration and reduced financial flexibility. Though somewhat smaller than its rated peers, with only 60 properties, Pan Pacific's portfolio quality is quite good. These centers are well-located in densely populated suburban markets and are well-occupied at over 97%.

The San Francisco-based Western is a fully integrated equity REIT that is focused on owning, managing, developing, and redeveloping neighborhood and community shopping centers. Western's corporate credit rating reflects the company's moderately conservative operating and financial policy, which has been offset by a constrained competitive position and limited access to capital. The company presently has investments in 57 properties, primarily anchored by supermarkets. Western's shopping centers tend to be smaller than Pan Pacific's at 115,000 square feet (sq. ft.), on average, versus 155,000 sq. ft., and they are not as well-occupied at about 93%.

OUTLOOK: STABLE

The combined company's focus on stable grocery-anchored neighborhood centers with manageable lease expirations should continue to provide a stable cash flow. Furthermore, Standard & Poor's believes it more than likely that the integration of these two geographically complimentary portfolios will proceed smoothly and that the company will be able to leverage its improved market position and expanded tenant relationships to improve occupancy in the acquired portfolio.--CreditWire.