MVP REIT and MVP REIT II Announce Definitive Merger Agreement

Two publicly registered non-traded real estate investment trusts, MVP REIT Inc. and MVP REIT II Inc., have entered into a definitive merger agreement, where MVP I plans to merge with and into a wholly-owned merger subsidiary of MVP II, with the merger subsidiary continuing as the surviving entity.

The merger agreement was approved by the boards of both REITs and must still be approved by MVP REIT I shareholders. If the merger is approved, MVP I shareholders are expected to receive 0.365 shares of MVP II common stock for each share of MVP I common stock they own. Fractional shares will be paid in cash.

“The MVP REITs are unique in that they invest solely in parking structures and facilities around the country, a compelling asset class that we believe provides us and our stockholders with tremendous upside opportunities,” said Mike Shustek, chairman and chief executive officer of MVP I, and president, chief executive officer and chairman of the board of MVP II. “We believe that the merger of MVP REIT and MVP REIT II will create a company greater than the sum of its parts.”

The merger agreement also provides MVP I with a go-shop period, where the MVP I special committee and its financial advisor, Robert A. Stanger & Co., will actively solicit alternative proposals from third parties for 45 days until 11:59 p.m. on July 10, 2017.

The merger agreement provides that MVP I would pay a termination fee of $750,000 (plus expenses not to exceed $500,000) to MVP II if MVP I terminates the merger agreement due to a superior proposal that arises during the go-shop period. The termination fee will increase to $1.5 million (plus expenses not to exceed $500,000) if MVP I terminates the merger agreement after the go-shop period.

The MVP II special committee was advised by Houlihan Lokey Capital and Vinson & Elkins L.L.P., as financial and legal advisers, respectively. Venable LLP provided legal advice to the MVP I special committee.

MVP II also amended its advisory agreement with MVP Realty Advisors LLC, which will become effective if the merger is consummated. The agreement will eliminate acquisition fees, disposition fees and subordinated performance fees; and provides the payment of an annual 1.1 percent asset management fee, payable monthly, that may not exceed $2 million annually until certain financial thresholds are met.

MVP I and MVP II also entered into a termination and fee agreement with MVP Realty Advisors. Under the termination agreement, at the effective time of the merger, MVP I’s existing advisory agreement will terminate and MVP II will pay MVP Realty Advisors an advisor acquisition payment of approximately $3.6 million. The advisor acquisition payment will be the only fee paid to MVP Realty Advisors in connection with the merger.

As previously reported by The DI Wire, MVP I announced that it would suspend its distribution reinvestment plan and share repurchase plan pending the consummation of the announced merger. The suspension of the distribution reinvestment plan took effect on May 11, 2017, and the suspension of the share repurchase plan will take effect on June 1, 2017.

MVP I also announced that monthly distributions for record holders as of May 24, 2017 are expected to be paid on June 10, 2017 and will consist of a $0.0225 cash distribution per share (3 percent per year based upon the initial $9.00 offering price), a stock dividend equal to .002414 shares of stock for each share owned (3 percent per year), and a special one-time distribution of $0.0105 in additional cash distributions per share (0.7 percent per year for the remaining two months left in the quarter based upon the initial $9.00 offering price).

Thereafter, MVP I anticipates paying monthly cash distributions of $0.0225 per share and stock dividends of .0024 shares for each share of stock owned.

Additionally, the audit committee of the MVP I board dismissed RBSM LLP as the REIT’s independent registered public accounting firm and replaced them with RSM US LLP.

MVP REIT completed its initial public offering in September 2015 after raising $97.3 million from the sale of its common stock. The company’s portfolio consists of 24 properties with an investment cost of $132.3 million, according to Summit Investment Research.

MVP REIT II closed its offering in December 2016 and has raised $62 million in investor equity. The company owns interests in 14 properties with a total purchase price of approximately $121.7 million, according to Summit Investment Research.

Both REITs are managed by MVP Realty Advisors LLC.

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