Cole Corporate Income Trust and Select Income REIT Enter into $3.1 Billion Merger Agreement
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In the cash election merger, CCIT stockholders will have the right to elect to receive
SIR has announced that it intends to increase its dividend to
The CCIT transaction is expected to be accretive to SIR's 2015 Funds from Operations ("FFO"). Net of
The CCIT portfolio is comprised primarily of single-tenant, net-leased office and industrial assets located in strategic locations, encompassing 87 properties in 30 states, totaling approximately 18.3 million square feet. The portfolio is 100% leased with a weighted average lease term of 11.4 years and approximately 53% of the tenants are investment grade-rated. Top tenants in the portfolio include Amazon.com, Tesoro Corporation, F5 Networks, Noble Energy, FedEx, Allstate Insurance and
"We are pleased to announce this transaction with Select Income REIT which delivers CCIT stockholders with as much as a 30.4% cumulative return on their original investment, along with potential upside growth from the performance of the combined portfolio," said
Strategic and Financial Benefits of the Transaction
The merger creates a well-diversified company with attractive metrics increasing size, diversification, lease term and investment grade concentrations.
- Increased Size and Scale. The combined companies will have a pro forma enterprise value of
$4.6 billion , which is more than double the current enterprise value of SIR and will make it the fifth largest net lease REIT based on square footage. The increased scale and public equity float resulting from the transaction significantly enhances SIR's place in the net lease sector. - Increase in Distributions. For CCIT stockholders who elect to receive stock, the transaction increases the annualized dividend by
$0.07 to$0.72 per share dividend, an increase of 10.8% from current CCIT annualized dividend of$0.65 per share. SIR has announced it intends to increase its dividend to$2.00 per share annually from$1.92 per share, an increase of 4.2%, upon completion of the transaction. - Attractive Imbedded Growth Potential. CCIT's 2% contractual annual rent increases are among the strongest in the net lease space and will complement the significant rent resets that are unique to SIR's Hawaiian portfolio. The transaction is anticipated to be accretive to the stockholders in both the near term and the long term.
- Increase in Diversification and Improved Tenant Roster. The combined portfolio has a significant investment-grade concentration (37%). The combined portfolio will reduce the exposure to any single tenant to less than 4.1% of annualized base rent. The combined portfolio will also provide broader geographic diversification.
- Enhanced Weighted Average Lease Term and Reduced Exposure to Near-term Lease Expirations. The weighted average lease term of the combined portfolio is 11.1 years, with only 10.7% of leases expiring in the next five years.
Approvals and Timing
The merger is expected to close in early 2015, subject to the approval of the transaction by CCIT's stockholders and the approval of SIR's stockholders of the issuance of the shares in the transaction, along with other customary closing conditions.
Supplemental information regarding the transactions can be found on the homepage of
Advisors
About
CCIT, managed by
About Cole Capital®
Cole Capital® is the private capital management business of ARCP. As the exclusive sponsor of net lease non-listed REITs,
Important Information Regarding Stockholder Return and Transaction Value Calculations
The total cumulative stockholder return calculation referenced herein assumes that: (i) the initial investment was made on
The
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger between SIR and CCIT, the parties expect to prepare and file with the
Interests of Participants
Cautionary Statement Regarding Forward-Looking Statements
This communication contains certain "forward-looking" statements as that term is defined by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are predictive in nature, that depend on or relate to future events or conditions, or that include words such as "believes", "anticipates", "expects", "may", "will", "would," "should", "estimates", "could", "intends", "plans" or other similar expressions are forward-looking statements. Forward-looking statements about the plans, strategies and prospects of SIR and CCIT and the proposed merger between SIR and CCIT are based on CCIT's current information, estimates and projections. Such statements involve significant known and unknown risks and uncertainties that may cause SIR's or CCIT's actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors: the failure to receive, on a timely basis or otherwise, the required approvals by the stockholders of SIR and CCIT; the risk that a condition to closing of the proposed transaction may not be satisfied; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the possibility that the anticipated benefits and synergies from the proposed transaction cannot be fully realized or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of SIR's and CCIT's operations will be greater than expected; operating costs and disruption of management's attention from ongoing business operations may be greater than expected; the effect of the announcement of the proposed merger on SIR's and CCIT's relationships with customers, tenants, lenders, operating results and business generally; the outcome of any legal proceedings relating to the merger or the merger agreement; risks to consummation of the merger, including the risk that the merger will not be consummated within the expected time period or at all; the ability of SIR, CCIT or the combined company to retain and hire key personnel and maintain relationships with providers or other business partners pending the consummation of the transaction; and the impact of legislative, regulatory and competitive changes and other risk factors relating to the industries in which SIR and CCIT operate, as detailed from time to time in each of the reports filed by SIR and CCIT with the
Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found under Item 1.A in each of SIR's and CCIT's Annual Report on Form 10-K for the fiscal year ended
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