CIM Group has provided additional details on its plans relating to its five publicly registered non-traded real estate investment trusts: CIM Real Estate Finance Trust Inc., Cole Office & Industrial REIT Inc. (CCIT II), Cole Office & Industrial REIT Inc. (CCIT III), Cole Credit Property Trust V Inc. (CCPT V), and CIM Income NAV Inc.
“Following the onset of the COVID-19 pandemic and the related economic impact of shutdowns, CIM and its affiliates undertook comprehensive reviews of the non-traded REIT businesses advised by CIM and concluded that greater scale, tenant diversity, asset type diversity, financial strength and fundraising flexibility would best position each of the REITs to thrive in a post-pandemic economic environment and achieve premium valuations for their shareholders,” said Richard Ressler, principal and co-founder of CIM Group. “CIM took immediate action and now we are pleased to announce the next steps of our strategic planning efforts.”
As previously reported, CIM Real Estate Finance Trust had merger agreements with each of CCIT II, CCIT III and CCPT V executed on August 30, 2020, and each REIT had a “go-shop” period during which the special committees of their respective boards had the right to solicit alternative acquisition proposals from third parties.
CIM Real Estate Finance Trust received notice that CCIT II had received a merger proposal during its go-shop period that valued CCIT II at a 24 percent premium (less transaction costs) to its June 30, 2020 net asset value and that CIM Real Estate Finance Trust would have four days to engage in a negotiation to improve on that proposal. CIM Real Estate Finance Trust declined to engage in further negotiations.
On November 2, 2020, CCIT II announced that Griffin Capital Essential Asset REIT (GCEAR) would acquire CCIT II for approximately $1.2 billion in a stock-for-stock transaction. The merger would combine similar portfolios of single-tenant office and industrial properties with long-term, net leases with high-quality corporate tenants.
In exchange for each share of CCIT II common stock, CCIT II shareholders will receive 1.392 shares of GCEAR Class E common stock. Based on GCEAR’s latest reported NAV as of June 30, 2020, the exchange ratio implies a transaction price of $12.33 per CCIT II share, before transaction expenses, relative to CCIT II’s June 30, 2020 NAV of $9.93 per share, implying a 24 percent premium before transaction expenses.
The transaction is expected to close in the first quarter of 2021.
Mergers of each of CCIT III and CCPT V with CIM Real Estate Finance Trust Progressing
After the expiration of each REIT’s go-shop period and upon terminating its merger agreement with CCIT II, CIM Real Estate Finance Trust increased the proposed merger consideration for each of CCIT III and CCPT V.
As a result, CCPT V shareholders will receive 2.892 shares of CIM Real Estate Finance Trust stock for each CCPT V share. CCIT III shareholders will receive 1.098 shares of CIM Real Estate Finance Trust stock for each CCIT III share. The revised exchange ratios result in an 11.5 percent and a 3.5 percent premium to CCPT V’s and CCIT III’s respective June 30, 2020 NAVs.
The combined company would have approximately $4.8 billion in total asset value and an NAV of $2.6 billion, based upon the companies’ respective June 30, 2020 NAVs, creating a commercial real estate credit-focused REIT primarily invested in net lease assets and commercial real estate debt.
The transactions are expected to close in the fourth quarter of 2020, subject to customary closing conditions.
Following these mergers, CIM Income NAV Inc., a public non-traded REIT that primarily acquires single-tenant net-leased commercial properties, will be the sole equity REIT managed by affiliates of CIM focused primarily on net-lease equity investments with some investment in core, metropolitan commercial and multifamily properties.
CIM is a real estate and infrastructure owner, operator, lender and developer.