Select Income, Cole Corporate Income Trust to Merge in $3.1B Deal

The list of 2014’s REIT M&As continues to grow with Select Income REIT's acquisition of Cole Corporate Income Trust.
CCIT acquired the 232,500-square-foot Magellan Health Services-occupied office building in St. Louis, Mo., in November 2013.

CCIT acquired the 232,500-square-foot Magellan Health Services-occupied office building in St. Louis, Mo., in November 2013.

By Barbra Murray, Contributing Editor

The list of 2014’s REIT M&As continues to grow as Select Income REIT announces that it has signed on to acquire Cole Corporate Income Trust Inc. in a $3.1 billion merger.

Select Income will walk away with an 87-property portfolio of net-leased office and industrial assets totaling approximately 18.3 million square feet, spanning 30 states — and 100 percent leased. When all is said and done, excluding a 2.2 million-square-foot medical office building portfolio to be sold to Senior Housing Properties Trust for $539 million, the total merged portfolio will consist of 114 properties encompassing 42.1 million square feet in 35 states plus land in Hawaii, with a total occupancy level of 98 percent.

According to the terms of the agreement, CCIT stockholders will have the option of receiving $10.50 in cash or 0.36 shares of Select Income common stock for each share of CCIT common stock. Select Income plans to rely on proceeds from the simultaneous MOB-portfolio sale, cash on hand and proceeds from its unsecured revolving bank credit facility to fund the acquisition. Over the long term, the REIT will utilize a combination of debt and equity capital to finance the deal.

Ultimately, the merger provides an expansion in size and scale, an increase in distributions, desirable embedded growth potential, as well as an increase in tenant and geographic diversification.

“CCIT’s board and (CCIT manager) Cole Capital’s management team thoroughly evaluated options to maximize value for CCIT stockholders, and we believe this transaction with SIR generates significant stockholder value,” Lisa Beeson, executive vice president & COO of American Realty Capital Properties Inc., parent company of Cole Capital, noted in a prepared statement. “Since initiating capital raise in mid-2011 and effectively deploying those funds, we are now providing a full-circle liquidity event for CCIT that generates attractive cumulative returns of up to 30.4 percent for stockholders. Overall, this transaction represents the fourth successful non-listed REIT liquidity event for Cole Capital in the past 18 months.”

The merger is on track to close in early 2015.