Griffin Capital Essential Asset REIT Inc. and Griffin Capital Essential Asset REIT II Inc., two non-traded real estate investment trusts, have entered into a definitive agreement to merge in an all-stock transaction, creating a $4.75 billion self-managed REIT.
Griffin Capital Essential Asset REIT II will be the surviving entity of the combined company and will oversee a portfolio of 103 office and industrial properties totaling approximately 27.4 million square feet. The combined portfolio will be 96.5 percent occupied, with a remaining weighted average lease term of 7.4 years.
The company said the transaction “will generate significant benefits for shareholders, including substantial cost savings, increased operating efficiencies, and immediate accretion to earnings and cash flow.”
In addition, Griffin Capital Essential Asset REIT is now self-administered following the contribution of Griffin Capital Real Estate Company LLC on December 14, 2018.
The self-administration transaction provides certain benefits to Griffin Capital Essential Asset REIT shareholders, including a reduction in the operating expenses of the REIT, which will extend to the combined company following the completion of the merger.
Shortly after the merger closes, Griffin Capital Essential Asset REIT II plans to conduct a tender offer for all shareholders of at least $100 million.
“We could not be more thrilled to announce these transactions. In addition to the significant value they immediately bring to shareholders, we believe the size, capitalization, and cost structure of the combined company positions it well for the future,” said Michael Escalante, CEO and president of GCEAR and president of GCEAR II. “REITs with enhanced scale and experienced internal management are viewed more favorably by institutional investors and lenders, enhancing the REIT’s potential liquidity optionality and value to shareholders.”
The transaction is expected to close in the first half of 2019 with the approval of both company’s shareholders.
Robert A. Stanger & Co. Inc. and Bank of America Merrill Lynch are acting as financial advisors to Griffin Capital Essential Asset REIT. SunTrust Robinson Humphrey Inc. is acting as financial advisor to Griffin Capital Essential Asset REIT II’s special committee of the board of directors.
Nelson Mullins Riley & Scarborough LLP is providing legal counsel to Griffin Capital Essential Asset REIT, and Venable LLP is providing legal counsel its special committee of the board of directors. Morris, Manning & Martin, LLP is providing legal counsel to Griffin Capital Essential Asset REIT II’s special committee of the board of directors. Baker McKenzie is providing legal counsel to Griffin Capital.
Griffin Capital Essential Asset REIT’s portfolio includes 76 office and industrial properties with a total REIT capitalization of approximately $3.5 billion. The company’s initial public offering was declared effective by the Securities and Exchange Commission in November 2009. The REIT closed its follow-on offering in April 2014 and has raised a total of approximately $1.5 billion in investor equity, according to Summit Investment Research.
Griffin Capital Essential Asset REIT II has acquired 35 office and industrial buildings totaling approximately with a total REIT capitalization of approximately $1.3 billion. The offering was declared effective by the SEC in July 2014 and closed in January 2017 after raising $746 million in investor equity. The REIT commenced a follow-on offering as a perpetual life REIT in September 2017, and had raised approximately $23.2 million, as of August 15, 2018.