Four REITs Fuse Two Related Mega Deals
Cole Corporate Income Trust and Select Income REIT Agree to $3 Bil. Merger; Select To Finance Deal with $539 Mil. Sale of 23 MOBs to Senior Housing Properties Trust
September 2, 2014
Select Income REIT agreed to acquire all of the outstanding common stock of Cole Corporate Income Trust for a little more than $3 billion to create an office and industrial net lease REIT leader.
In doing so, Select separately agreed to sell a portfolio of 23 medical office buildings it will acquire in the deal to Senior Housing Properties for $539 million.
American Realty Capital Properties Inc.’s Cole Capital manages Cole Corporate Income Trust Inc.
Cole Corporate Income Trust owns 87 properties, including a property owned through a consolidated joint venture arrangement, comprising more than 17.5 million NNN rentable square feet of office and industrial properties in 30 states.
Select Income will be getting 64 of those with approximately 16.1 million rentable square feet; Senior Housing Properties will get the remainder.
The Select/Cole transaction is subject to approval by shareholders of both firms and other customary conditions, and it is expected to close during the first quarter of 2015.
“The combination of Select Income REIT and Cole Corporate Income Trust will create the premiere single tenant net lease office and industrial REIT with more than 43 million square feet of real estate in 35 states that are 98% occupied,” said David Blackman, president and COO of Select Income. “The combined portfolio of properties will have an 11.1 year weighted average remaining lease term, an average property age of 10.7 years and investment grade rated tenants paying 37% of annual rents. The scale, diversification and improved portfolio metrics are expected to lower SIR’s cost of capital and enhance shareholder value.”
As part of the transaction, Select will sell 23 health care properties to Senior Housing Properties Trust.
The 23 properties contain 2.2 million square feet and are in 12 states. The properties are currently 100% occupied for a weighted average term (by rents) of 9.5 years, with no scheduled lease expiration before December 31, 2018.
“The acquisition of this Class A MOB portfolio fits squarely within Senior Housing Properties’ stated strategy to continuously diversify and strengthen its health care assets,” said David Hegarty, president and COO Senior Housing Properties. “The large majority of these MOBs are recently built, Class A properties, and the average age of the portfolio is just 10 years.”
"The announced merger of Cole Corporate Income Trust with Select Income REIT demonstrates ARCP's ability through Cole Capital to raise capital, invest in high-credit-quality assets and harvest value," said David S. Kay, president of ARCP. "Our institutional approach to reviewing strategic alternatives helped generate this successful liquidity event.”