Select Income To Buy CCIT For $2.5 Bln, To Divest Healthcare Assets

(RTTNews) - Select Income REIT (SIR) Tuesday announced a definitive merger agreement to acquire Cole Corporate Income Trust or CCIT, a non-traded net lease REIT, for approximately $3 billion, including the assumption of approximately $298 million of mortgage debt. SIR will acquire CCIT's full property portfolio, which includes 64 office and industrial net lease properties as well as 23 healthcare properties.

Of this portfolio, Select Income REIT has agreed to sell the 23 healthcare properties to Senior Housing Properties Trust (SNH) for about $539 million, including debt, immediately upon closing of the CCIT merger. The sale will result in a net purchase price to SIR of approximately $2.5 billion. Both SIR and SNH are managed by REIT Management & Research LLC.

The acquisition, which has been unanimously approved by the Board of directors, is expected to create an office and industrial net lease REIT leader. SIR expects the merger transaction to be modestly accretive to its normalized funds from operations per share in 2015.

The consideration is payable in a combination of cash and SIR common shares plus the assumption of certain mortgage debt. Subject to the deal terms, CCIT stockholders will receive either $10.50 in cash or SIR shares at an exchange ratio of 0.36 of SIR share for each share of CCIT common stock held. The blended amount to be paid by SIR as merger consideration is approximately $10.32 per share of CCIT common stock.

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.

SIR further said its Board of Trustees expects to increase regular quarterly common share distribution by $0.02 to $0.50, or $2.00 per share per year, upon the closing of the merger.

The combination of Select Income REIT and Cole Corporate Income Trust is projected to 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 percent occupied.

David Blackman, president and chief operating officer of SIR, stated that the scale, diversification and improved portfolio metrics are expected to lower SIR's cost of capital and enhance shareholder value.

According to SIR, the acquisition is consistent with its 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.

The acquisition would also more than double SIR's asset base and enterprise value, creating the premiere office and industrial net lease REIT.

In a separate statement, Senior Housing Properties Trust said the acquisition fits squarely within its strategy to continuously diversify and strengthen its healthcare assets. The large majority of these MOBs are recently built, Class A properties, and the average age of the portfolio is just 10 years.

In the deal, UBS Investment Bank is acting as exclusive financial advisor to SIR.

Select Income shares closed Friday's trading at $27.90, up $0.04 or 0.14 percent.