CIM Real Estate Finance Trust Inc. (CMFT), Cole Office & Industrial REIT Inc. (CCIT II), Cole Office & Industrial REIT Inc. (CCIT III), and Cole Credit Property Trust V Inc. (CCPT V), four publicly registered non-traded real estate investment trusts sponsored by affiliates of CIM Group, have agreed to merge in separate stock-for-stock transactions, with CIM Real Estate Finance Trust as the surviving entity. The transactions are expected to close in the fourth quarter of 2020, pending stockholders’ approval.
The combined company will have approximately $5.9 billion in total asset value, primarily invested in net lease assets and commercial real estate debt. The company noted that the transactions are expected to close concurrently but are not cross-conditioned on the consummation of the others.
“Following the onset of the COVID-19 pandemic and the related economic impact of shutdowns, each of CMFT, CCIT II, CCIT III, and CCPT V undertook comprehensive reviews of their businesses and prospects and concluded that greater scale, tenant diversity, asset type diversity, financial strength and fund raising flexibility would best position each of them to thrive in a post-pandemic economic environment,” said Richard Ressler, principal and co-founder of CIM Group.
Ressler added that the combined company could provide several benefits for stockholders and would be well-positioned to navigate the post-COVID economic environment.
As of June 30, 2020, the proposed combined company’s asset mix was approximately 38 percent retail net lease, 28 percent multi-tenant retail, 20 percent office net lease, 11 percent loans, and 3 percent industrial net lease. In addition, the real estate portfolio had 559 properties totaling approximately 25.8 million square feet, with an occupancy rate of approximately 96 percent and a weighted average lease term of approximately 8.8 years.
As of June 30, 2020, the pro forma limited near-term debt maturities and net leverage of the proposed combined company was approximately 39 percent, along with “substantial cash” on its balance sheet, according to the company. The company expects to use the available cash and leverage capacity to fund future investments.
CIM Real Estate Finance Trust is expected to realize approximately $3.5 million in annual savings as a result of operational efficiencies from the proposed mergers, the company said. The merger transactions could also better position it for a future liquidity event, including a public listing.
For each share of common stock, CCIT II, CCIT III and CCPT V stockholders would receive, 1.501,1.093 and 2.691 shares of CIM Real Estate Finance Trust common stock, respectively, which is valued at approximately $10.97 per CCIT II share, $7.99 per CCIT III share and $19.67 per CCPT V share, based on CIM Real Estate Finance Trust’s most recently estimated net asset value per share of $7.31.
Following the closings of the merger transactions, former stockholders of CIM Real Estate Finance Trust, CCIT II, CCIT III and CCPT V are expected to own approximately 67 percent, 22 percent, 1 percent and 10 percent of the combined company, respectively.
Upon closing, the board of CIM Real Estate Finance Trust will be increased so that all independent directors of CCIT II, CCIT III and CCPT V that are not currently independent directors of the combined company will be added to the board. It is anticipated that five to seven directors will be recommended for election.
The distribution reinvestment plans of all four REITs will be suspended pending the closing of the proposed transactions.
CIM Real Estate Finance Trust has investments in net lease and multi-tenant retail assets as well as real estate loans and other credit investments. Cole Credit Property Trust V has investments in retail net lease and multi-tenant retail assets. Each of the Cole Office & Industrial REITs hold investments in office and industrial net lease assets.