GCEAR, Signature Will Merge into $3B REIT

EL SEGUNDO, CA—Griffin Capital Essential Asset REIT and Signature Office REIT said Monday afternoon they have agreed to merge in a stock-for-stock deal. The office and industrial REIT will have a combined portfolio of 15.6 million square feet across 69 properties in 21 states, with a capitalization of $3 billion based on gross proceeds. The deal is expected to close in the first half of 2015.

“As we look forward to the next phase of our lifecycle, we believe the additional scale, diversity and operating efficiencies that our combined portfolios will garner is paramount in driving additional stockholder value in the future,” says Kevin Shields, GCEAR's chairman and CEO. “Earlier this year we sold all of the remaining capital stock in our follow-on offering, and once we fully invest this equity, we expect our total capitalization to exceed $3 billion upon stabilization.”

Frank Bishop, chairman of the Norcross, GA-based Signature, says the deal “is in the best long-term interest of our stockholders, allowing them to be part of a company with greater scale, size and diversification.” He adds that “the combined company will be well-positioned for growth and the execution of a successful liquidity event in the future.”

Shields will continue in the same leadership capacity post-merger, and the GCEAR executive team will continue to lead the combined company. Under terms of the agreement announced Tuesday, GCEAR will issue 2.04 shares of its own stock for each Signature share of stock, and will also refinance Signature's $159 million of existing debt.

Signature's portfolio of 15 assets totaling 2.6 million square feet, acquired between late 2010 and 2012, is seen as “highly complementary” to GCEAR's existing portfolio. Currently at 13 million square feet, the GCEAR portfolio is primarily comprised of single-tenant net-leased office and industrial real estate assets that serve as key operating facilities for a roster that includes American Express, Coca-Cola, JP Morgan Chase and United Technologies.

Eastdil Secured represented Signature in the deal, and Houlihan Lokey acted as financial advisors to Signature. Robert A. Stanger & Co. provided GCEAR's board of directors with a fairness opinion for the transaction.

The GCEAR/Signature deal, one of many large-scale agreements announced thus far in 2014, marks the second merger involving a Griffin Capital Corp.-sponsored REIT in the past few months. This past August, Grffin American Healthcare REIT II and NorthStar Healthcare announced an agreement for NorthStar to acquire Grffin-American for $4 billion in stock and cash.