Griffin Capital Essential Asset REIT To Merge with Griffin Capital Essential Asset REIT II
December 20, 2018 | James Sprow | Blue Vault
In a press release on December 20, 2018, Griffin Capital Company, LLC, announced that “Griffin Capital Essential Asset REIT, Inc. (“GCEAR”) and Griffin Capital Essential Asset REIT II, Inc. (“GCEAR II”) have entered into a definitive agreement to merge in an all-stock transaction, creating a $4.75 billion, self-managed REIT, which will generate significant benefits for shareholders, including substantial cost savings, increased operating efficiencies, and immediate accretion to earnings and cash flow. This merger combines two highly complementary portfolios with similar construction and investment mandates, significantly increasing the size, scale, and diversification of the combined company.”
At the effective time of the merger, each issued and outstanding share of GCEAR’s common stock (or fraction thereof), will be converted into the right to receive 1.04807 shares of newly created Class E common stock of GCEAR II, and each issued and outstanding share of GCEAR’s Series A cumulative perpetual convertible preferred stock will be converted into the right to receive one share of newly created Series A cumulative perpetual convertible preferred stock of the GCEAR II.
As of June 30, 2018, GCEAR had an estimated NAV per share of $10.05. GCEAR II’s perpetual offering in the Q3 2018 Blue Vault report had shares of Class D, S and I at a recent NAV of $9.67 per share and Class T shares at $9.68 per share.
Self-Administration Transaction
In addition, GCEAR announced it is now self-administered following the contribution of Griffin Capital Real Estate Company, LLC (“GRECO”) to GCEAR on December 14, 2018. The self-administration transaction provides immediate benefits to GCEAR shareholders, including a considerable reduction in the operating expenses of GCEAR; these benefits will extend to the combined company following the completion of the merger of GCEAR into GCEAR II. Shortly following the closing of the merger, GCEAR II, as the surviving entity, intends to conduct a tender offer for all shareholders of at least $100 million.
“We could not be more thrilled to announce these transactions. In addition to the significant value they immediately bring to shareholders, we believe the size, capitalization, and cost structure of the combined company positions it well for the future. REITs with enhanced scale and experienced internal management are viewed more favorably by institutional investors and lenders, enhancing the REIT’s potential liquidity optionality and value to shareholders,” said Michael J. Escalante, CEO and President of GCEAR and President of GCEAR II.
The combined company following the Merger will temporarily retain the name “Griffin Capital Essential Asset REIT II, Inc.” The Company Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.
The combined company will have a total capitalization of approximately $4.75 billion, and will own 103 properties in 25 states, consisting of approximately 27.4 million square feet. On a pro forma basis, the combined company portfolio will be 96.5% occupied, on a weighted average basis, with a remaining weighted average lease term of 7.4 years. Approximately 66.9% of the combined company portfolio net rent, on a pro forma basis, will come from properties leased to tenants and/or guarantors who have, or whose non-guarantor parent companies have, investment grade or what management believes are generally equivalent ratings. In addition, no tenant will represent more than 4.2% of the net rents of the combined Company, on a pro forma basis, with the top ten tenants comprising a collective 27.4% of the net rents of the combined company.
Source: SEC, Blue Vault
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