Vancouver-based real estate investment trust City Office REIT Inc. is going private in a deal with an affiliate of New York’s Elliott Investment Management and South Florida’s Morning Calm Management valued at about US$1.1 billion.
The deal with MCME Carell Holdings is contingent upon City Office selling its Phoenix portfolio that totals 1.5 million square feet of office space. According to regulatory filings, the REIT is set to sell the portfolio to an undisclosed buyer for US$296 million. The portfolio sale is set to close Aug. 14, according to the filings, with proceeds to pay off debts and “for general corporate purposes."
The REIT's Phoenix portfolio includes Block 23, 5090 N 40th St., San Tan and the Papago Technology Center in Tempe, and the Pima Center, Camelback Square and The Quad in Scottsdale.
The deal arrives a month after Henry Chin, global head of research at real estate services firm CBRE, said the trend of REITs trading at a discount to their net asset values points to the "potential for [mergers and acquisitions] or public-to-private transactions,” in a presentation.
Headquartered at 666 Burrard St. in downtown Vancouver, City Office’s portfolio includes a controlling interest in over 5.4 million square feet of office properties located mostly throughout Sun Belt markets. Major markets where the REIT is present in include Dallas; Denver; Orlando, Florida; Phoenix; Portland, Oregon; Raleigh, North Carolina; San Diego; Seattle; and Tampa, Florida.
"In light of a challenging environment for the office sector, this Transaction delivers immediate and significant value to our shareholders,” said James Farrar, CEO of City Office, in a Thursday press release from the REIT.
City Office is set to become a private company after the deal with MCME Carell Holdings closes in the fourth quarter, according to the release. MCME Carell Holdings is an affiliate of Elliott Investment Management and Morning Calm Management. Elliott managed US$72.7 billion in assets as of the end of last year.
Boca Raton, Florida-based Morning Calm Management is an investment and management firm with over 10 million square feet of commercial real estate holdings owned on behalf of institutional investors and private capital.
“This opportunity underscores our partnership's continued belief in the recovery of the office sector and our interest in acquiring high-quality office assets in strong growth markets," said Mukang Cho, CEO of Morning Calm Management, in the release.
For the record
Raymond James & Associates and JLL served as City Office's exclusive financial advisers. Law firm DLA Piper LLP served as City Office's special M&A legal counsel, and Hogan Lovells US served as City Office's corporate legal counsel. Eastdil Secured acted as the buyer's financial adviser, and Gibson Dunn & Crutcher served as the buyer's legal counsel.