Carter Validus Mission Critical REIT II Plans to Internalize Management
July 29, 2020
On July 29, 2020, Carter Validus Mission Critical REIT II, Inc. announced that the REIT had entered into a definitive agreement to purchase all assets from Carter Validus REIT Management Company II, LLC, or the Company’s Sponsor, Carter Validus Advisors II, LLC, or the Company’s Advisor, and their affiliates necessary for the operation of the Company’s business, providing for the internalization of external management function, or the Internalization Transaction. The total consideration for the Internalization Transaction will be paid in cash and consists of approximately $40 million payable over an approximately two-year period, with $25 million to be paid at closing, $7.5 million to be paid on March 31, 2021, and $7.5 million to be paid on March 31, 2022, subject to acceleration in certain circumstances. The Internalization Transaction is expected to close on September 30, 2020, subject to the satisfaction of customary closing conditions.
The Internalization Transaction is expected to bring various benefits to the Company, including:
• Cost savings: The Company expects its general and administrative expenses to decrease by approximately $18 million on an annualized basis starting in 2021 primarily because it will no longer pay any acquisition, asset management, construction management, property management or disposition fees to affiliates of the Sponsor.
• Continuity of management and further alignment of interests with the Company: The Company expects to continue to benefit from the industry expertise provided by its experienced workforce, while doing so under a more efficient cost structure. The Company entered into employment agreements with its current key executive officers, to be effective upon the closing of the Internalization Transaction, providing a seamless transition and clarity as to future senior leadership. A significant portion of the compensation of key executive officers includes equity in the Company, further aligning interests between management and the Company.
• Preference for internal management structure in traded equity REITs: The Company will be organized in a way that it believes is preferable to equity analysts and institutional investors should its board of directors determine, in the future, to list the Company’s securities on a national securities exchange.
“We are excited to embark on this latest evolution of our Company, a natural progression from our merger last year with Carter Validus Mission Critical REIT, Inc., which we believe strengthens our corporate governance by eliminating many perceived conflicts of interest and better aligning the interests of management with those of our stockholders. Furthermore, we expect that the Internalization Transaction will provide substantial cost savings to the Company over time, better situating the Company to explore potential liquidity options in the future,” said Michael Seton, Chief Executive Officer and President of the Company.
The Company intends to change its name to Sila Realty Trust, Inc. immediately following the closing of the Internalization Transaction. The material terms of the Internalization Transaction are disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2020.
Source: SEC
