Starwood Real Estate Income Trust Inc., a non-traded real estate investment trust sponsored by Starwood Capital Group, has filed a preliminary proxy statement urging shareholders of Monmouth Real Estate Investment Corp. (NYSE: MNR), a publicly traded industrial REIT, to vote against the proposed sale to Equity Commonwealth (NYSE: EQC), a publicly-traded REIT founded by Sam Zell. Monmouth’s board recently rejected Starwood REIT’s unsolicited cash offer to purchase the firm.
In May, Monmouth announced its agreement to be purchased by Equity Commonwealth in a deal valued at approximately $3.4 billion, including debt. Monmouth investors would receive 0.67 shares of Equity Commonwealth for each share they own, and the combined company would have an equity market capitalization of approximately $5.5 billion.
In mid-July, Starwood REIT submitted its all-cash acquisition proposal to acquire Monmouth for net cash consideration of $18.88 per share. Starwood said that its proposal offered a 5.6 percent premium and approximately $100 million of additional value compared to the implied value of $17.88 per share of the Equity Commonwealth transaction, based on the closing price of EQC’s common shares of $26.69 on July 27, 2021. Monmouth’s board rejected the proposal and continues to recommend that its shareholders vote on the deal with Equity Commonwealth.
“We firmly believe that EQC’s all-stock offer is not in the best interests of all of Monmouth’s shareholders,” said Ethan Bing, managing director at Starwood Capital. “Starwood Capital has proposed an all-cash alternative that would deliver significant additional value to Monmouth shareholders compared to EQC’s offer along with certainty that value will be realized. We stand ready to sign a finalized merger agreement.”
Bing added, “Monmouth’s board continues to recommend an inferior transaction that denies shareholders the ability to realize significant additional value. We believe Monmouth shareholders should protect their own best interests by voting against the EQC transaction and urge their board to accept Starwood Capital’s superior proposal and allow shareholders to vote on that proposal.”
The Monmouth board does not believe the terms set forth in Starwood’s proposal “would provide a basis for discussions regarding an alternative transaction.” Brian Haimm, lead independent director of Monmouth, said that after an “exhaustive” strategic alternatives process, “the board unanimously concluded…that the EQC transaction is the best path forward for Monmouth stockholders.”
Monmouth shareholders will vote on the Equity Commonwealth transaction at the upcoming special meeting scheduled for August 17, 2021.
Monmouth shares closed at $18.93 on Wednesday, down 0.13 percent from the previous close, while Equity Commonwealth closed at $26.55, down 0.52 percent.
Starwood Capital Group is a private investment firm with a core focus on global real estate, energy infrastructure and oil and gas. The firm has raised more than $60 billion and currently has approximately $90 billion of assets under management.
Starwood Real Estate Income Trust Inc., which invests in stabilized real estate across the United States and Europe, raised $3.9 billion in its initial public offering from December 2017 to June 2021. The REIT’s $10 billion follow-on offering was declared effective in early June 2021 and has raised $500 million, as of mid-July 2021. As of June 30, 2021, the REIT’s aggregate NAV was $4.1 billion.