LOS ANGELES--(BUSINESS WIRE)--CIM Group (“CIM”) today announced updates on the strategic plans for the public non-traded Real Estate Investment Trusts (“REITs”): CIM Real Estate Finance Trust, Inc. (“CMFT”); Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”); Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”); Cole Credit Property Trust V, Inc. (“CCPT V”); and CIM Income NAV, Inc. (“INAV”), each managed by affiliates of CIM.
“Following the onset of the COVID-19 pandemic and the related economic impact of shutdowns, CIM and its affiliates undertook comprehensive reviews of the non-traded REIT businesses advised by CIM and concluded that greater scale, tenant diversity, asset type diversity, financial strength and fundraising flexibility would best position each of the REITs to thrive in a post-pandemic economic environment and achieve premium valuations for their shareholders,” said Richard Ressler, Principal and Co-Founder of CIM Group. “CIM took immediate action and now we are pleased to announce the next steps of our strategic planning efforts.”
Pursuant to CMFT’s merger agreements with each of CCIT II, CCIT III and CCPT V executed on August 30, 2020, each REIT had a “go-shop” period during which the special committees of their respective Boards of Directors had the right to solicit alternative acquisition proposals from third parties. CMFT received notice that CCIT II had received a merger proposal during its go-shop period that valued CCIT II at a 24% premium (less transaction costs) to its June 30, 2020 Net Asset Value (“NAV”) and that CMFT would have four days to engage in a negotiation to improve on that proposal. CMFT declined to engage in further negotiations and agreed with CCIT II to waive the four-day negotiation allowing each of CCIT II and CMFT to move forward promptly with their respective proposed mergers.
Mergers of each of CCIT III and CCPT V with CMFT Progressing
After the expiration of each REIT’s go-shop period and upon terminating its merger agreement with CCIT II, CMFT increased the proposed merger consideration for each of CCIT III and CCPT V. As a result, CCPT V shareholders will receive 2.892 shares of CMFT stock for each CCPT V share and CCIT III shareholders will receive 1.098 shares of CMFT stock for each CCIT III share. The revised exchange ratios result in an 11.5% and a 3.5% premium to CCPT V’s and CCIT III’s respective June 30, 2020 NAVs.
The combined CMFT, CCIT III and CCPT V (“Combined Company”) would have approximately $4.8 billion in total asset value and an NAV of $2.6 billion, based upon the companies’ respective June 30, 2020 NAVs, creating a leading commercial real estate credit-focused REIT with scale, primarily invested in net lease assets and commercial real estate debt. The immediate benefits of the transaction include increased scale, asset and tenant diversity while maintaining a low-leverage, flexible balance sheet. The Combined Company’s greater scale and portfolio diversification should provide it with greater access to debt and equity capital markets. The merger transactions are anticipated to better position the Combined Company for an eventual future liquidity event, including a public market listing.
The transactions are expected to close in the fourth quarter of 2020, subject to customary closing conditions, including the approval of the respective mergers and certain other matters by shareholders of CCIT III and CCPT V. The transactions of CCIT III and CCPT V are expected to close concurrently but are not cross-conditioned on the consummation of the other.
CCIT II
On November 2, 2020, CCIT II announced that it has entered into a definitive merger agreement whereby Griffin Capital Essential Asset REIT, Inc. (“GCEAR”) would acquire CCIT II for approximately $1.2 billion in a stock-for-stock transaction. The merger would combine similar portfolios of single-tenant office and industrial properties with long-term, net leases with high-quality corporate tenants.
In exchange for each share of CCIT II common stock, CCIT II shareholders will receive 1.392 shares of GCEAR Class E common stock. Based on GCEAR’s latest reported NAV as of June 30, 2020, the exchange ratio implies a transaction price of $12.33 per CCIT II share, before transaction expenses, relative to CCIT II’s June 30, 2020 NAV of $9.93 per share, implying a 24% premium before transaction expenses.
This transaction accomplishes CIM’s principal post-COVID-19 objective for CCIT II by increasing its scale and diversity while delivering a premium to shareholders. CIM will be assisting GCEAR and CCIT II in pursuing and closing their proposed merger.
The transaction is expected to close in the first quarter of 2021.
INAV to Become CIM’s Sole Equity REIT Investing Primarily in Net Lease with some Investment in Core, Urban Real Estate
Following these mergers, INAV, a public non-traded REIT that primarily acquires single-tenant net-leased commercial properties, will benefit from being the sole equity REIT managed by affiliates of CIM focused primarily on net-lease equity investments with some investment in core, metropolitan commercial and multifamily properties with growth potential, either by acquiring properties directly or by investing in other funds that focus on these asset types, including funds managed by CIM’s affiliates.
Cautionary Statement Regarding Forward-Looking Information
This communication includes certain forward-looking statements within the meaning of Section 27A the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Statements can generally be identified as forward-looking because they include words such as "believes," "anticipates," "expects," "would," "could," or words of similar meaning. Statements that describe future plans and objectives are also forward-looking statements. These statements are based on the current expectations of management for CMFT, CCIT II, CCIT III, CCPT V and INAV and on currently available industry, financial and economic data. Actual results may vary materially from those expressed or implied by the forward-looking statements, which are subject to a number of risks and uncertainties, many of which are out of the control of such companies, including, but not limited to, those associated with the risk that one or more of the proposed mergers will not be consummated within the expected time period or at all; the occurrence of any event, change or other circumstance that could give rise to the termination of one or more of the merger agreements; the failure to satisfy the conditions to the consummation of each proposed merger, including the approval of the shareholders of CCIT II, CCIT III or CCPT V, as applicable; the ability of the combined companies to achieve expected cost synergies or to engage in any liquidity event or public offering; the disruption of management’s attention from ongoing business operations due to the proposed mergers; the availability of suitable investment or disposition opportunities; the impact of the COVID-19 pandemic on the operations and financial condition of each of CMFT, CCIT II, CCIT III, CCPT V and INAV and the real estate industries in which they operate, including with respect to occupancy rates, rent deferrals and the financial condition of their respective tenants; general financial and economic conditions, which may be affected by government responses to the COVID-19 pandemic; legislative and regulatory changes; and other factors, including those set forth in the section entitled “Risk Factors” in CMFT’s, CCIT II’s, CCIT III’s, CCPT V’s and INAV’s most recent Annual Reports on Form 10-K, as amended, and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”), and other reports filed by CMFT, CCIT II, CCIT III, CCPT V and INAV with the SEC, copies of which are available on the SEC’s website, www.sec.gov. Forward-looking statements are not guarantees of performance or results and speak only as of the date such statements are made. Except as required by law, none of CMFT, CCIT II, CCIT III, CCPT V or INAV undertakes any obligation to update or revise any forward-looking statement in this communication, whether to reflect new information, future events, changes in assumptions or circumstances or otherwise.
About CIM Group
CIM is a community-focused real estate and infrastructure owner, operator, lender and developer. Since 1994, CIM has sought to create value in projects and positively impact the lives of people in communities across the Americas by delivering more than $60 billion of essential real estate and infrastructure projects. CIM’s diverse team of experts applies its broad knowledge and disciplined approach through hands-on management of real assets from due diligence to operations through disposition. CIM strives to make a meaningful difference in the world by executing key environmental, social and governance (ESG) initiatives and enhancing each community in which it invests. For more information, visit www.cimgroup.com.