PRINCETON, N.J. and NEW YORK CITY — Chambers Street Properties (NYSE: CSG) has agreed to buy Gramercy Property Trust Inc. (NYSE: GPT) in an all-stock deal valued at about $5.7 billion. The merger will create the largest industrial and office net lease REIT, according to the firms.
The Board of Trustees of Chambers Street and the Board of Directors of Gramercy have unanimously approved the merger agreement and the transaction. Per the agreement, Gramercy shareholders will receive 3.18 shares of Chambers Street for each share of Gramercy common stock they own.
Upon closing, Chambers Street shareholders will own about 56 percent and Gramercy shareholders will own about 44 percent of the combined company. The stock-for-stock transaction is expected to be tax free to shareholders.
The combined portfolio includes 288 properties and 52 million square feet of space in major markets throughout the U.S. and Europe. About 85 percent of the merged company’s real estate assets will be in target markets such as New York/New Jersey, Dallas, Baltimore/Washington, D.C., Los Angeles and South Florida. The portfolio will have an average lease term of more than seven years, with 43 percent of the tenants being investment grade.
“This strategic combination is the next logical step for Gramercy in creating a best-in-class net lease REIT,” says Gordon DuGan, CEO of the merged company.
“We expect that combining with Chambers Street will create a market leader with greater scale, broader tenant and geographic diversification across the United States and Europe and additional financial flexibility. With a larger and more diverse platform, we believe the new Gramercy will be better positioned to pursue larger acquisition opportunities, which we anticipate going forward.”
The combined company will have a 10-person board consisting of five trustees designated by Chambers Street and five trustees designated by Gramercy. Charles Black, chairman of the Chambers Street Board, will be the non-executive board chairman, while DuGan will also serve as a director of the combined company.
The Gramercy name will be retained and is expected to continue to trade on the New York Stock Exchange under Gramercy’s current ticker symbol. The merger is expected to close in the fourth quarter, and is subject to customary closing conditions, including approval of the transaction by shareholders of both companies.
In addition to DuGan, the new company will be led by the Gramercy management team of Benjamin Harris as president and Jon Clark as CFO. Martin Reid, Chambers Street’s interim president and interim CEO and CFO will act as head of transition for the combined company.
J.P. Morgan Securities LLC served as financial advisor to Chambers Street and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Clifford Chance US LLP served as legal advisors to Chambers Street. Morgan Stanley served as financial advisor to Gramercy and Wachtell, Lipton, Rosen & Katz and Morgan, Lewis & Bockius served as legal advisors to Gramercy.
Princeton, N.J.-based Chambers Street is a real estate investment trust focused on acquiring, owning and operating net leased industrial and office properties leased to creditworthy tenants. As of March 31, Chambers Street owned or had a majority interest in 127 properties located across 19 U.S. states, France, Germany and the United Kingdom, for a total of about 37.6 million rentable square feet.
Chambers Street stock price closed at $7.28 per share on Wednesday, July 1, down from $8.09 one year ago.
New York-based Gramercy Property Trust is a global investor and asset manager of commercial real estate. Gramercy specializes in acquiring and managing single-tenant, net-leased industrial and office properties purchased through sale-leaseback transactions or directly from property developers and owners.
The company focuses on income-producing properties leased to high-quality tenants in major markets in the United States and Europe.
Gramercy Property Trust’s stock closed at $22.46 per share on Wednesday, July 1, up from $6.13 one year ago.