Another investor is taking a run at Monmouth Real Estate Investment Corp.: Industrial Logistics Properties Trust has entered into a definitive agreement to acquire all of the outstanding shares of the industrial REIT for $21.00 per share in an all-cash transaction that is valued at $4 billion. The transaction price, which includes committed MNR acquisitions, transaction costs and the assumption of $409 million of debt, represents a 24% premium to the closing share price of $16.99 on December 18, 2020 and a 36% premium to the 30-day volume weighted average unaffected trading share price of $15.43.
The acquisition comes on the heels of a tug-of-war between Equity Commonwealth and Starwood Capital Group over Monmouth. The REIT had agreed to a sale to Equity Commonwealth despite Starwood's protests that it was the better deal. Ultimately, though, Monmouth's shareholders did not approve the sale to Equity Commonwealth.
It is easy to see why Monmouth is such a prize in the red-hot logistics market. The REIT owns 126 e-commerce focused industrial properties spread over 26 million square feet, with a weighted average remaining lease term of approximately 8 years. The portfolio is over 80% leased to investment grade rated tenants and generates annualized rental revenue of $169.4 million.
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The portfolio expands ILPT's ability to benefit from ongoing strong fundamental tailwinds in the industrial sector, CEO John Murray said in prepared remarks.
"This accretive transaction more than doubles the properties in ILPT's mainland portfolio and this scale is expected to expand ILPT's growth opportunities and access to capital which we expect will drive cash flow growth and long-term value for our shareholders."
To finance this acquisition, ILPT expects to enter into a joint venture with one or more institutional investors for equity investments of between $430 million and $1.3 billion. ILPT plans to finance the balance of the $4 billion purchase with proceeds from new mortgage debt and the assumption of approximately $409 million of existing MNR mortgage debt. Depending on the ultimate size of the joint venture equity investments, ILPT may also sell some $1.6 billion of MNR properties to finance the transaction. ILPT has secured commitments from lenders for a $4 billion bridge loan facility to make sure it can close this deal.
The transaction is subject to customary closing conditions, including MNR shareholder approval, and is expected to close in the first half of 2022.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
