CIM Real Estate Finance to Merge With Three Net Lease REITs in $5.9B Deal
The mergers are expected to better position the company for a public market listing.
LOS ANGELES—CIM Real Estate Finance Trust, Cole Office & Industrial REIT, Cole Office & Industrial REIT and Cole Credit Property Trust V have entered into definitive merger agreements in which CIM Real Estate Finance Trust is acquiring each of the respective smaller REITs in separate stock-for-stock, tax-free merger transactions.
The pro forma combined company would have approximately $5.9 billion in total asset value, creating a commercial real estate credit-focused REIT primarily invested in net lease assets and commercial real estate debt. These smaller companies are non-traded REITs managed by affiliates of CIM Group.
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 the various stockholders. The transactions are expected to close concurrently but are not cross-conditioned on the consummation of the others.
The mergers are expected to better position the company for a public market listing.
“Following the onset of the COVID-19 pandemic and the related economic impact of shutdowns, each of CMFT, CCIT II, CCIT III, and CCPT V undertook comprehensive reviews of their businesses and prospects and concluded that greater scale, tenant diversity, asset type diversity, financial strength and fundraising flexibility would best position each of them to thrive in a post-pandemic economic environment,” Richard Ressler, principal and co-founder of CIM Group, said in prepared remarks.
The new company will opportunistically pursue growth strategies and reposition its portfolio mix of net lease assets, multi-tenant retail assets and CRE debt over the long term, as well as diversify its credit investments. As of June 30, 2020, the pro forma asset mix was approximately 38% retail net lease, 28% multi-tenant retail, 20% office net lease, 11% loans and 3% industrial net lease assets (based on asset value for owned real estate, and fair value estimates for loans as of June 30, 2020).
The pro forma owned real estate portfolio had 559 properties totaling approximately 25.8 million square feet, with an occupancy rate of approximately 96%, a weighted average lease term of approximately 8.8 years, and, as a percentage of annualized rental income, investment-grade tenancy of approximately 41%. Its top 10 tenants generated approximately 30%, and no tenant generated more than 4.2% of annualized rental income.
The pro forma company had limited near-term debt maturities and net leverage of approximately 39%, along with substantial cash on its balance sheet.