PIMCO to Acquire Office REIT Columbia Property Trust in $3.9B Deal
NEWPORT BEACH, CALIF. AND NEW YORK CITY — Pacific Investment Management Co. (PIMCO) has entered into a definitive agreement with Columbia Property Trust (NYSE: CXP) to acquire the New York City-based office REIT. Funds managed by PIMCO will acquire all of the outstanding shares of Columbia’s common stock in a deal valued at $3.9 billion, including debt.
Columbia owns 15 office properties spanning more than 6 million square feet in the gateway markets of New York City, Boston, San Francisco and Washington, D.C. The firm’s portfolio also includes four office properties under development and 8 million square feet under management for private investors and third parties.
The U.S. office sector has been severely impacted by the outbreak of COVID-19 and rise of the Delta variant as millions of office-using employees are currently working from home. According to The Wall Street Journal, New York City and San Francisco reported the lowest usage rates among the 10 major office markets tracked by Falls Church, Va.-based Kastle Systems, which monitors access swipes of office buildings. New York City had a usage rate of 22.3 percent and San Francisco had a 19.7 usage rate for the week ending Aug. 25.
Despite the headwinds facing the office sector, John Murray, global head of private commercial real estate at PIMCO, says his firm expects Columbia’s office portfolio to “perform well in the years ahead.”
“We continue to believe that high-quality office buildings in major U.S. cities offer long-term value for our clients, and Columbia has assembled a modernized, well-located portfolio of assets,” says Murray.
Columbia’s board of directors, which has unanimously approved the transaction, has been soliciting offers since the spring. The acquisition agreement with PIMCO is the culmination of a strategic review process that involved nearly 90 potential counterparties to participate, including strategic acquirers, private equity firms and other investment management firms.
PIMCO’s per-share acquisition price of $19.30 in cash is a premium of 27.1 percent over Columbia’s unaffected closing share price of $15.18 on Friday, March 12, before the company began soliciting buyers.
“This transaction provides Columbia shareholders with immediate and certain cash value at a significant premium to the company’s public market valuation, and we are confident it represents the best outcome for all Columbia shareholders,” says Constance Moore, chair of the Columbia board of directors.
Upon completion of the acquisition, PIMCO will take Columbia private, thus the firm’s common stock will no longer be listed on the New York Stock Exchange. The transaction is expected to close as early as this year, subject to approval by Columbia’s shareholders and the satisfaction of other customary closing conditions.
Morgan Stanley & Co. LLC is serving as lead financial advisor to Columbia, and Wachtell, Lipton, Rosen & Katz is serving as its legal advisor. Eastdil Secured LLC and J.P. Morgan are also acting as financial advisors to Columbia.
Goldman Sachs & Co. LLC is serving as lead financial advisor to PIMCO, and Latham & Watkins LLP and Milbank LLP are serving as legal advisors. Deutsche Bank Securities Inc. is also acting as a financial advisor to PIMCO. Cushman & Wakefield is acting as a real estate consultant to PIMCO.
Founded in 1971, PIMCO is based in Newport Beach and remains an independent subsidiary of Allianz SE following its $3.3 billion acquisition in 2000 by the Munich-based financial services giant. The companies combined their real estate platforms last year and today PIMCO manages over $180 billion in commercial real estate assets globally. Overall, PIMCO’s assets under management total $2.2 trillion as of June 30.
— John Nelson