NEWTON, MASS. — The board of directors of Select Income REIT (NYSE: SIR) has unanimously approved a definitive merger agreement to acquire Cole Corporate Income Trust (CCIT) for approximately $3 billion.
CCIT will provide SIR with 64 office and industrial properties with approximately 16.1 million rentable square feet. As part of the transaction, SIR has entered an agreement to sell 23 of CCIT’s healthcare properties to Senior Housing Properties Trust (NYSE: SNH) for approximately $539 million.
The transaction will be payable in a combination of cash and SIR common shares, plus the assumption of approximately $298 million of mortgage debt.
The merger is subject to approval by SIR and CCIT shareholders and is expected to close during the first quarter of 2015.
Among the CCIT properties that will become SIR’s are distribution centers for Amazon.com and headquarter facilities for companies such as Tesoro Corp., Noble Energy Inc., F5 Networks, United Launch Alliance and Compass Group PLC.
The purchase of CCIT’s portfolio will expand SIR’s footprint from 21 U.S. states to 35 states. The percentage of rental income from the combined company’s top five tenants will decline from 28 percent to 18 percent.
The combined company will have an increased weighted (by rents) average remaining lease term of 11.1 years and an increased occupancy of approximately 98 percent.
SIR estimates the capitalization rate of the acquisition to be approximately 6.4 percent.
The merger consideration being paid by SIR is structured as a cash or stock election under which CCIT stockholders may elect to receive cash for up to 60 percent of CCIT’s outstanding common stock or SIR common shares for up to 60 percent of CCIT’s outstanding common stock.
SIR is a publicly trade real estate investment trust that owns and invests in properties that are primarily net-leased to single tenants. As of June 2014, SIR owned 50 properties with approximately 27 million square feet located in 21 states, including 11 properties with approximately 17.8 million square feet on the island of Oahu, Hawaii.
SIR’s stock price closed at $27.90 per share on Friday, Aug. 29, up from $24.31 per share a year ago.
— Scott Reid