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8-K - 8-K - SELECT INCOME REIT | a2221303z8-k.htm |
EX-2.1 - EX-2.1 - SELECT INCOME REIT | a2221303zex-2_1.htm |
EX-2.2 - EX-2.2 - SELECT INCOME REIT | a2221303zex-2_2.htm |
EX-10.1 - EX-10.1 - SELECT INCOME REIT | a2221303zex-10_1.htm |
EX-99.1 - EX-99.1 - SELECT INCOME REIT | a2221303zex-99_1.htm |
EX-99.3 - EX-99.3 - SELECT INCOME REIT | a2221303zex-99_3.htm |
EX-99.2 - EX-99.2 - SELECT INCOME REIT | a2221303zex-99_2.htm |
Exhibit 99.4
FOR IMMEDIATE RELEASE
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Contact: |
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Jason Fredette, Director, Investor Relations |
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(617) 796-8320 |
Select Income REIT to Acquire Cole Corporate Income Trust for Approximately $3 Billion
Creates the Premiere Office and Industrial Net Lease REIT
Provides SIR with 64 Additional, High Quality Single Tenant Net Leased Office and Industrial Properties
Enhances All of SIRs Tenant, Property and Leasing Metrics
SIR Board Expects to Increase Dividend upon Closing
Newton, MA (September 2, 2014): Select Income REIT (NYSE: SIR) today announced that its Board has unanimously approved a definitive merger agreement to acquire all of the outstanding common stock of Cole Corporate Income Trust (CCIT) for approximately $3.0 billion, payable in a combination of cash and SIR common shares plus the assumption of certain mortgage debt, to create an office and industrial net lease REIT leader. The transaction is subject to approval by SIR and CCIT shareholders and other customary conditions, and it is expected to close during the first quarter of 2015.
David Blackman, President and Chief Operating Officer of SIR, made the following statement:
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. 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 SIRs cost of capital and enhance shareholder value.
SIR believes CCIT has the highest quality single tenant net lease office and industrial portfolio among all publicly owned REITs. CCIT is a non-traded net lease REIT that will provide SIR with 64 office and industrial properties with approximately 16.1 million rentable square feet (excluding 23 healthcare properties to be sold as described below). This addition is expected to enhance all of SIRs key portfolio measurements, including:
· Improving SIRs Lease Term and Occupancy 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%, which are industry leading statistics in the net lease sector.
· Enhancing SIRs Portfolio Quality The acquisition of CCIT is consistent with SIRs strategy as CCIT owns high quality office and industrial buildings, including corporate headquarters, built to suit properties, buildings which are
strategic to tenants and properties in which tenants have invested significant capital. Among CCITs properties are strategic distribution centers for companies such as Amazon.com (Nasdaq: AMZN) and headquarter facilities for companies such as Tesoro Corporation (NYSE: TSO), Noble Energy, Inc. (NYSE: NBL), F5 Networks (Nasdaq: FFIV), United Launch Alliance and Compass Group PLC (LSE: CPG). SIRs combination with CCIT will also lower the average age of SIRs buildings to 10.7 years from 14.8 years.
· Strengthening SIRs Tenant Credit Qualities A high percentage of CCITs tenants are investment grade rated, which will result in SIRs overall percentage of investment grade rated tenants (by rents) increasing to 37% from 28% and the investment grade percentage of its top 20 tenants increasing to 44% from 37%.
· Diversifying SIRs Tenant Base CCITs portfolio will expand SIRs footprint to 35 from 21 U.S. states while further diversifying the industry types of SIRs tenants. In addition, the percentage of rental income from the combined companys top 5 tenants will decline to 18% from 28%.
· Providing Greater Financial Scale The acquisition will more than double SIRs asset base and enterprise value, creating the premiere office and industrial net lease REIT among all publicly traded REITs. SIR believes this increased size has the potential to lower SIRs cost of capital and enhance shareholder value.
Deal Structure, Approvals and Timing
SIR will acquire CCITs full property portfolio, which includes 64 office and industrial net lease properties as well as 23 healthcare properties, for a total consideration of approximately $3.0 billion including the assumption of approximately $298 million of mortgage debt and excluding transaction costs. As part of the transaction, SIR has entered an agreement to sell the 23 healthcare properties to Senior Housing Properties Trust (NYSE: SNH) for approximately $539 million (including $509 million in net proceeds and assumed debt of approximately $30 million) immediately upon closing of the merger, resulting in a net purchase price to SIR of approximately $2.5 billion.
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% of CCITs outstanding common stock or SIR common shares for up to 60% of CCITs outstanding common stock, with the type of consideration subject to proration if over 60% cash or stock is elected. Subject to the terms and conditions of the merger agreement and proration, CCIT stockholders will receive either $10.50 in cash or SIR common shares at an exchange ratio of 0.36 of a SIR common share for each share of CCIT common stock held. Based on the closing price of SIRs common shares on August 29, 2014 and assuming 60% of CCIT stockholders elect cash consideration, the blended amount to be paid by SIR as merger consideration is approximately $10.32 per share of CCIT common stock. To fund the cash portion of the merger consideration, SIR will use net proceeds from the sale of CCITs healthcare properties, borrowings under SIRs revolving credit facility and a new 364 day, fully committed bridge loan for up to $1.0 billion. SIR intends to seek investment grade debt ratings from rating agencies and to refinance debt incurred with this transaction with longer term senior notes, bank debt and/or other debt financing.
Based on estimated 2015 GAAP net operating income and pending completion of SIRs accounting analysis, SIR believes the acquisition cap rate is approximately 6.4% per annum (the sale of CCITs healthcare properties is being done on the same cap rate basis). Assuming 60% of CCITs purchase price is paid in cash and that debt incurred with this transaction is refinanced with longer term debt financing at current market rates, SIR believes this merger transaction will be modestly accretive to SIRs normalized funds from operations per share in 2015.
Completion of the merger is subject to the approval of SIR and CCIT shareholders as well as satisfaction of customary closing conditions. Completion of the sale of CCITs healthcare properties to SNH and the funding of the bridge loan are subject to satisfaction of customary closing conditions. Government Properties Income Trust and Reit Management & Research LLC, which combined own approximately 22 million shares of SIR common shares representing approximately 36.8% of SIRs outstanding shares, have entered voting agreements to support the merger.
The merger is expected to close during the first quarter of 2015. In the interim, both SIR and CCIT expect to continue to pay customary common stock dividends. SIRs Board of Trustees expects to increase SIRs regular quarterly common share distribution by $0.02 to $0.50 ($2.00 per share per year) upon the closing of the merger.
Advisors
UBS Investment Bank is acting as exclusive financial advisor to SIR. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to the company. Joint Lead Arrangers for the bridge loan are Citigroup and UBS Investment Bank.
Conference Call
SIR will host a conference call on Tuesday, September 2, 2014 at 11:00 a.m. Eastern Time to discuss todays announcement. This call will be accompanied by an investor presentation that has been made available on the companys website (www.sirreit.com) and will be filed with the Securities and Exchange Commission, or SEC.
The conference call telephone number is (800) 230-1766. Participants calling from outside the United States and Canada should dial (612) 333-4911. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on September 9, 2014. To access the replay, dial (800) 475-6701. The replay pass code is 335603.
A live audio webcast of the conference call will also be available in a listen-only mode on the companys website, www.sirreit.com. Participants wanting to access the webcast should visit the companys website about five minutes before the call. The archived webcast will be available for replay on the companys website after the call for about one week after the call. The transcription, recording and retransmission in any way of SIRs conference call are strictly prohibited without the prior written consent of SIR.
About Select Income REIT
SIR is a real estate investment trust, or REIT, which owns and invests in properties that are primarily net leased to single tenants. As of June 30, 2014, SIR owned 50 properties (280 buildings, leasable land parcels and easements) with a total of approximately 27.0 million square feet located in 21 states, including 11 properties (229 buildings, leasable land parcels and easements) with approximately 17.8 million square feet which are primarily leasable industrial and commercial lands located on the island of Oahu, HI. SIR is headquartered in Newton, MA.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER SIR USES WORDS SUCH AS BELIEVE, EXPECT, ANTICIPATE,
INTEND, PLAN, ESTIMATE, OR SIMILAR EXPRESSIONS, SIR IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON SIRS PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
· THIS PRESS RELEASE DESCRIBES A TRANSACTION BY WHICH SIR WILL ACQUIRE CCIT. THE CLOSING OF THIS TRANSACTION IS SUBJECT TO CERTAIN CONDITIONS AND CONTINGENCIES INCLUDING APPROVAL BY SIRS SHAREHOLDERS AND CCITS STOCKHOLDERS. SIR CAN PROVIDE NO ASSURANCE THAT THESE CONDITIONS AND CONTINGENCIES WILL BE SATISFIED. ACCORDINGLY, SIR CAN PROVIDE NO ASSURANCE THAT THIS TRANSACTION WILL BE CONSUMMATED, THAT IT WILL NOT BE DELAYED OR THAT ITS TERMS WILL NOT CHANGE.
· THIS PRESS RELEASE STATES AND IMPLIES THAT SIR EXPECTS ITS INCREASED SIZE AND OTHER IMPROVED PORTFOLIO CHARACTERISTICS RESULTING FROM SIRS ACQUISITION OF CCIT MAY LOWER SIRS COST OF CAPITAL AND IMPROVE SHAREHOLDER VALUE BY INCREASING SIRS EQUITY MARKET CAPITALIZATION AND SHARE TRADING LIQUIDITY. SIRS FUTURE COST OF CAPITAL AND THE FUTURE TRADING VALUE OF SIRS SHARES WILL BE DETERMINED BY MARKET CONDITIONS, INCLUDING THE FUTURE RELATIVE DEMAND AND AVAILABILITY FOR SIRS DEBT AND EQUITY SECURITIES. THESE MARKET CONDITIONS ARE LARGELY BEYOND SIRS CONTROL. ALSO, SIR CURRENTLY INTENDS TO SEEK RATINGS FOR ITS FUTURE DEBT ISSUANCE, INCLUDING THE ISSUANCE OF DEBT TO FINANCE LONG TERM THE COST OF SIRS ACQUISITION OF CCIT. SIRS CREDIT CHARACTERISTICS ARE NOT CURRENTLY RATED BY ANY RATINGS AGENCY. SIRS FUTURE DEBT RATINGS WILL BE DETERMINED BY INDEPENDENT CREDIT RATINGS AGENCIES BASED ON CRITERIA THEY DEEM RELEVANT. SIR CAN PROVIDE NO ASSURANCE THAT ITS FUTURE DEBT ISSUANCES WILL BE INVESTMENT GRADE RATED. FOR THESE REASONS, AMONG OTHERS, SIR CAN PROVIDE NO ASSURANCE THAT ITS ACQUISITION OF CCIT WILL LOWER SIRS COST OF CAPITAL OR OTHERWISE IMPROVE THE VALUE OF SIRS SHARES.
· THIS PRESS RELEASE STATES THAT BASED ON ESTIMATED 2015 GAAP NET OPERATING INCOME AND PENDING COMPLETION OF SIRS ACCOUNTING ANALYSIS, SIR BELIEVES THAT ITS ACQUISITION CAP RATE IS APPROXIMATELY 6.4%. ACTUAL 2015 GAAP NET OPERATING INCOME MAY BE DIFFERENT THAN CURRENTLY ESTIMATED AND SIRS FINAL ACCOUNTING ANALYSIS MAY RESULT IN CHANGES TO ACTUAL 2015 GAAP NET OPERATING INCOME. AS A RESULT, THE ACTUAL ACQUISITION CAP RATE MAY BE HIGHER OR LOWER THAN 6.4%.
· THIS PRESS RELEASE STATES THAT ASSUMING THAT 60% OF SIRS CONSIDERATION FOR CCIT IS PAID IN CASH AND THAT DEBT INCURRED WITH THIS TRANSACTION IS REFINANCED WITH LONGER TERM DEBT FINANCING AT CURRENT MARKET RATES, SIR BELIEVES THAT ITS PURCHASE OF CCIT WILL BE MODESTLY ACCRETIVE TO SIRS NORMALIZED FUNDS FROM OPERATIONS PER SHARE IN 2015. THE PERCENTAGES OF THE CONSIDERATION WHICH WILL BE PAID IN CASH AND SIR COMMON SHARES WILL DEPEND UPON ELECTIONS MADE BY CCIT STOCKHOLDERS WHICH ARE BEYOND SIRS CONTROL. SIRS COST OF LONGER TERM DEBT CAPITAL TO FUND THIS ACQUISITION WILL LARGELY DEPEND UPON MARKET CONDITIONS WHICH ARE BEYOND SIRS CONTROL. ACCORDINGLY, SIR CAN PROVIDE NO ASSURANCE THAT THE TRANSACTION
DESCRIBED IN THIS PRESS RELEASE WILL BE ACCRETIVE TO SIRS NORMALIZED FUNDS FROM OPERATIONS IN 2015. IN FACT, THIS TRANSACTION MAY BE DILUTIVE TO SIRS NORMALIZED FUNDS FROM OPERATIONS PER SHARE.
· THIS PRESS RELEASE STATES THAT SIR EXPECTS ITS ACQUISITION OF CCIT TO CLOSE DURING THE FIRST QUARTER OF 2015. AS NOTED ABOVE, THE MERGER TRANSACTION DESCRIBED IN THIS PRESS RELEASE WILL REQUIRE APPROVAL BY BOTH CCITS STOCKHOLDERS AND THE ISSUANCE OF SIR SHARES IN THE MERGER WILL REQUIRE THE APPROVAL OF SIRS SHAREHOLDERS. SUCH SHAREHOLDER APPROVALS WILL BE SOLICITED BY A JOINT PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE REGISTRATION STATEMENT FOR THE SIR COMMON SHARES TO BE ISSUED IN THE MERGER WHICH MUST BE FILED WITH AND DECLARED EFFECTIVE BY THE SEC. THE PROCESS OF PREPARING REGISTRATION STATEMENTS IS TIME CONSUMING AND THE TIME REQUIRED FOR SEC CLEARANCE IS BEYOND SIRS CONTROL. ACCORDINGLY, SIR CAN PROVIDE NO ASSURANCE THAT ITS ACQUISITION OF CCIT WILL BE CLOSED DURING THE FIRST QUARTER OF 2015.
· THIS PRESS RELEASE DESCRIBES A TRANSACTION BY WHICH SIR WILL SELL CERTAIN PROPERTIES ACQUIRED IN THE MERGER TO SNH. THE HEALTHCARE PROPERTIES SALE IS SUBJECT TO CERTAIN CONDITIONS AND CONTINGENCIES, INCLUDING THE CONSUMMATION OF THE MERGER. ACCORDINGLY, SIR CAN PROVIDE NO ASSURANCE THAT THE HEALTHCARE PROPERTIES SALE WILL BE CONSUMMATED, THAT IT WILL NOT BE DELAYED OR THAT ITS TERMS WILL NOT CHANGE.
· THIS PRESS RELEASE INDICATES THAT SIR INTENDS TO FUND PART OF THE CASH CONSIDERATION WITH BORROWINGS UNDER ITS REVOLVING CREDIT FACILITY AND A $1.0 BILLION BRIDGE LOAN. THE COMMITMENT LETTER THAT SIR RECEIVED FOR THE BRIDGE LOAN IS SUBJECT TO VARIOUS CONDITIONS, INCLUDING MUTUALLY SATISFACTORY DOCUMENTATION, AND THE FULFILLMENT OF THE OBLIGATIONS THEREUNDER IS NOT A CONDITION TO SIRS OBLIGATIONS UNDER THE MERGER AGREEMENT. THERE CAN BE NO ASSURANCE THAT ALL THE CONDITIONS WILL BE SATISFIED, THAT THE TERMS OF THE BRIDGE LOAN WILL NOT CHANGE, OR THAT THE BRIDGE LOAN WILL BE AVAILABLE TO SIR TIMELY OR AT ALL. IF THE BRIDGE LOAN IS NOT FUNDED FOR ANY REASON, SIR MAY BE FORCED TO OBTAIN ALTERNATE FINANCING WHICH MAY BE ON TERMS AND CONDITIONS THAT ARE LESS FAVORABLE TO IT THAN THOSE IN THE COMMITMENT LETTER. SIR IS NOT COMMITTED TO INCUR THE ENTIRE BRIDGE LOAN OR ANY PORTION THEREOF, AND MAY UTILIZE OTHER DEBT OR EQUITY FINANCING FOR ALL OR A PORTION OF THE CASH CONSIDERATION. IN ADDITION, SIRS REVOLVING CREDIT FACILITY IS, AND THE BRIDGE LOAN WILL BE, IN U.S. DOLLARS AND ITS REVOLVING CREDIT FACILITY BEARS, AND THE BRIDGE LOAN WILL BEAR, INTEREST AT LIBOR PLUS A PREMIUM THAT IS SUBJECT TO ADJUSTMENT BASED UPON CHANGES TO SIRS LEVERAGE OR CREDIT RATINGS. ACCORDINGLY, SIR IS VULNERABLE TO CHANGES IN U.S. DOLLAR BASED SHORT TERM RATES, SPECIFICALLY LIBOR. IN ADDITION, UPON RENEWAL OR REFINANCING OF SIRS REVOLVING CREDIT FACILITY, SIR IS VULNERABLE TO INCREASES IN INTEREST RATE PREMIUMS DUE TO MARKET CONDITIONS OR ITS PERCEIVED CREDIT RISK. AS A RESULT, SIRS COST OF BORROWING MAY BE HIGHER THAN CURRENTLY EXPECTED AND MAY REDUCE OR ELIMINATE THE EXPECTED BENEFITS OF THE MERGER TO SIR.
· THIS PRESS RELEASE STATES THAT SIRS BOARD OF TRUSTEES EXPECTS TO RAISE SIRS REGULAR QUARTERLY COMMON SHARE DISTRIBUTION BY $0.02 TO $0.50 ($2.00 PER SHARE PER YEAR) UPON THE CLOSING OF SIRS ACQUISITION OF CCIT. SUCH AN INCREASE IS NOT
GUARANTEED TO OCCUR. ADDITIONALLY, AN IMPLICATION OF THIS STATEMENT MAY BE THAT SIR WILL CONTINUE TO PAY REGULAR QUARTERLY COMMON SHARE DISTRIBUTIONS OF $0.50 OR $2.00 PER SHARE PER YEAR THEREAFTER. HOWEVER, SIRS COMMON SHARE DISTRIBUTION RATES ARE SET AND RESET FROM TIME TO TIME IN THE DISCRETION OF SIRS BOARD OF TRUSTEES. THE SIR BOARD CONSIDERS MANY FACTORS WHEN SETTING SIRS DISTRIBUTION RATES INCLUDING SIRS HISTORICAL AND PROJECTED INCOME, SIRS HISTORICAL AND PROJECTED NORMALIZED FUNDS FROM OPERATIONS, SIRS CURRENT AND EXPECTED NEEDS AND AVAILABILITY FOR CASH, THE DISTRIBUTION RATE REQUIRED TO MAINTAIN SIRS TAX STATUS AS A REIT, AND OTHER MATTERS DEEMED RELEVANT BY SIRS BOARD. SIR CAN PROVIDE NO ASSURANCE REGARDING THE AMOUNT OF FUTURE DISTRIBUTIONS. IN FACT, SIRS FUTURE QUARTERLY DISTRIBUTIONS MAY BE LESS THAN $0.50 PER SHARE AND LESS THAN $2.00 PER SHARE PER YEAR.
THE INFORMATION CONTAINED IN SIRS FILINGS WITH THE SEC, INCLUDING UNDER RISK FACTORS IN SIRS PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE SIRS ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SIRS FORWARD LOOKING STATEMENTS. SIRS FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, SIR DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO FIND IT
In connection with the merger, SIR expects to file with the SEC a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents with respect to the merger with respect to both SIR and CCIT. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) IF AND WHEN THEY BECOME AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE JOINT PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER.
After the registration statement has been declared effective by the SEC, a definitive joint proxy statement/prospectus will be mailed to the SIR shareholders and CCIT stockholders. Investors will be able to obtain a free copy of documents filed with the SEC at the SECs website at www.sec.gov. In addition, investors may obtain free copies of SIRs filings with the SEC from SIRs website at www.sirreit.com and free copies of CCITs filings with the SEC from its website at www.colecapital.com.
PARTICIPANTS IN THE SOLICITATION RELATING TO THE MERGER
SIR, its Trustees and certain of its executive officers, CCIT, its directors and certain of its executive officers, Reit Management & Research LLC, SIRs manager, and Cole Corporate Income Advisors, LLC, CCITs advisor, and certain of their directors, officers and employees may be deemed participants in the solicitation of proxies from SIRs shareholders in respect of the approval of the issuance of SIR common shares in the merger and from CCITs stockholders in respect of the approval of the merger. Information regarding the persons who may, under the rules of the SEC, be considered participants
in the solicitation of SIR shareholders and CCITs stockholders in connection with the proposed merger will be set forth in the joint proxy statement/prospectus and the other relevant documents to be filed with the SEC. You can find information about SIRs Trustees and executive officers in its definitive proxy statement for SIRs 2014 Annual Meeting of Shareholders. You can find information about CCITs directors and executive officers in its definitive proxy statement filed with the SEC on Schedule 14A on April 8, 2014. These documents are available free of charge on the SECs website and from SIR or CCIT, as applicable, using the sources indicated above.
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