TIER REIT Inc., a publicly registered non-traded real estate investment trust formerly known as Behringer Harvard REIT I Inc., revealed that it plans to list its common stock on the New York Stock Exchange under the ticker symbol “TIER” on or about July 23, 2015, with completion of the expected listing subject to certain conditions.
Behringer Harvard REIT I, Inc. became self-managed in September 2012, and is now known as TIER REIT. The company owns a portfolio of commercial office properties throughout the United States valued at approximately $1.9 billion, based on aggregate purchase price. As of December 31, 2014, the REIT’s portfolio included interests in 37 properties in cities such as Atlanta, GA, Philadelphia, PA, Chicago, IL, Washington, D.C., and Houston, TX among others.
Originally launched in 2003 by Behringer Harvard, the REIT raised approximately $2.8 billion from investors via a series of offerings at $10 per share. It acquired the majority of its portfolio in the midst of the bubble that immediately preceded the Great Recession, and its board of directors most recently approved a valuation of $4.48 per share. Additionally, the REIT faces a challenging debt repayment schedule, with more than 60 percent coming due by the end of 2016.
This isn’t the first time we are hearing about this. As The DI Wire previously reported, on March 26th, the board of directors voted unanimously to pursue listing its common stock on a national securities exchange. The REIT had engaged J.P. Morgan Securities LLC to guide the process.
In a press release at the time, the REIT explained, “The board believes that such a listing best positions the company to maximize stockholder value over the long term by giving it access to additional capital for future growth.”
In conjunction with the expected NYSE listing, the company also expects to start a modified “Dutch auction” tender offer to purchase shares of its common stock. The company expects to allow stockholders to tender all or a portion of their shares, but if the tender offer is oversubscribed, shares will be accepted on a prorated basis.
TIER REIT anticipates funding the expected tender offer and all related fees and expenses with available cash and/or borrowings available under its existing credit facility. Tender offer documents with information about this expected tender offer, including detailed instructions on how to tender shares will be published and mailed to all stockholders of record when the tender offer commences.
In other TIER REIT news, the company has closed on an amended and restated secured credit facility which expands the in-place facility with an additional $275 million, seven-year term loan. Combined with the previous $250 million term loan and $225 million revolving line of credit, the facility now provides the company with total financing of up to $750 million.
TIER REIT previously entered into two interest rate swap agreements, which fixed the interest rate on the new term loan at approximately 3.67 percent. At closing, the revolving line of credit was undrawn, and the proceeds of the new term loan were used to repay two mortgage loans with a weighted-average interest rate of 5.79 percent.
Wells Fargo Securities LLC and J.P. Morgan Securities LLC were joint lead arrangers and joint book runners, and JPMorgan Chase Bank N.A. served as syndication agent. Wells Fargo Bank, National Association serves as administrative agent for the facility.
On June 30, the company also closed on joint ventures related to its two properties in Washington, D.C.—1325 and 1341 G Street. TIER REIT retained a minority interest in the joint ventures and repaid approximately $100 million of mortgage debt related to the 1325 G Street property. The company will continue to manage the D.C. properties on behalf of the joint ventures.
“2015 has seen the company make great strides in managing our near-term debt maturities and borrowing costs,” explains chief financial officer and treasurer, Dallas Lucas. At Dec. 31, 2014, we had approximately $945 million in debt maturing in 2015 and 2016.”
He continues, “This $275 million term loan combined with proceeds from strategic dispositions has reduced our 2015 and 2016 debt maturities by over $650 million, reduced our average borrowing costs, and extended and laddered our maturity schedule. We are grateful for the continued support and commitments from our lenders as we work to maximize value for our stockholders.”
And lastly, Rick Gilchrist has been named chairman of the board. Over the past 12 months, the board has expanded with three new members, and with these additions and the company’s pursuit of a listing on a national securities exchange, the board believed it was appropriate to realign this role for the company.
Chuck Dannis, past chairman, will remain on the board and continue to serve on the compensation committee. Dannis has been the company’s chairman since February 2013 and an independent director since 2003. Dannis played an instrumental role in assisting the company through its self-management transaction in September 2012 and positioning the company over the past several years in preparation for its listing on a national securities exchange, according to a prepared release.
“As TIER REIT moves closer to its listing on a national securities exchange, we believe that Rick’s extensive REIT and public markets background will assist us in executing the company’s future strategy,” said Dannis. “I have enjoyed my role as chairman over the last two years as the company transitioned to a self-managed REIT and look forward to the its future success as a publicly traded company.”
TIER REIT Inc. is a self-managed, Dallas, Texas-based real estate investment trust that acquires, develops and operates a portfolio of office properties in select U.S. markets.