Griffin Capital Essential Asset REIT, Inc. and Cole Office & Industrial REIT (CCIT II), Inc. announced a $1.2 billion stock-for-stock transaction whereby the Griffin REIT will acquire the Cole REIT and own a portfolio of assets valued at approximately $5.8 billion.
According to the companies, the merger will combine similar portfolios of single-tenant, office and industrial properties with long-term, net leases to high-quality corporate tenants. The combined company will be comprised of 125 properties totaling 31 million square feet consisting of 86 percent office properties and 14 percent industrial properties. The combined portfolio is 90 percent leased with a 7.4 year weighted average remaining lease term.
On August 30, 2020, CCIT II entered into a definitive merger agreement with CIM Real Estate Finance Trust, Inc. that included a “go-shop” period during which the special committee of the CCIT II board of directors had the right to solicit alternative acquisition proposals from third parties. CCIT II exercised its right to terminate the merger agreement with CIM Real Estate Finance Trust and accepted the superior proposal from Griffin Capital Essential Asset REIT.
“When presented with the opportunity to acquire CCIT II, we immediately recognized the benefits of a potential combination and we are pleased that the CCIT II Board [sic] concurred,” said Michael Escalante, chief executive officer of Griffin Capital Essential Asset REIT. “The merger provides a compelling strategic opportunity to both stockholder groups by joining two very similar property portfolios, while reducing overall operating costs and thereby increasing combined operating cash flows.”
In exchange for each share of CCIT II common stock, CCIT II stockholders will receive 1.392 shares of Griffin Capital Essential Asset REIT Class E common stock.
Based on the latest reported net asset value as of June 30, 2020, the exchange ratio implies a transaction price of $12.33 per CCIT II share, before transaction expenses.
On a pro forma basis, immediately following the closing of the merger, current CCIT II stockholders will own approximately 26.4 percent of the combined company and current Griffin Capital Essential Asset REIT stockholders will own approximately 73.6 percent.
Using the exchange ratio of 1.392x, based on the existing distribution policy of Griffin Capital Essential Asset REIT, CCIT II stockholders would receive an equivalent implied annualized distribution of $0.49 for each CCIT II share currently held.
Expected to close in the first quarter of 2021, the merger is subject to the satisfaction of customary conditions, including the approval of CCIT II stockholders.