Select Income REIT agreed to buy Cole Corporate Income Trust Inc. in a transaction valued at about $3 billion including debt to increase its holdings of U.S. net-lease properties.
Cole Corporate investors can choose to receive $10.50 in cash or 0.36 of a Select Income share for each share they hold, Newton, Massachusetts-based Select Income said in a statement today. Select Income plans to increase its dividend to $2 a share from $1.92 upon completion of the transaction, according a separate statement from Cole Corporate.
Select Income will acquire all of Cole Corporate’s real estate, including 64 office and industrial net-lease properties and 23 health-care properties, the real estate investment trust said. Select Income also agreed to sell the health-care assets to Senior Housing Properties Trust for $539 million, including assumed debt of about $30 million. That deal is contingent on SIR completing its acquisition of Cole Corporate.
Cole Corporate, a nontraded REIT, is managed by Cole Capital, the private capital business of New York-based American Realty Capital Properties Inc. American Realty, led by Chairman and Chief Executive Officer Nicholas Schorsch, is the biggest U.S. landlord of single-tenant buildings leased to businesses such as drugstores and fast-food restaurants.
The transaction would be the fourth successful nonlisted REIT liquidation for Cole Capital in the past 18 months, Lisa E. Beeson, chief operating officer of American Realty, said in the statement from Cole Corporate.
Upon completion of both deals, Select Income will own 114 properties in 35 U.S. states with 43.1 million square feet (4 million square meters) of space, according to Cole Corporate’s statement. Cole Corporate’s properties include distribution centers for tenants such as Amazon.com Inc. and headquarters for companies such as Tesoro Corp. and Noble Energy Inc.
Select Income said it expects the purchase of Cole Corporate to be completed in the first quarter of next year.
Schorsch’s AR Capital LLC is the largest fundraiser in the nontraded REIT business. Nontraded REITs, which mainly attract money from individual investors, have a finite life and eventually have to provide liquidity to shareholders. That can happen through a sale of the company or a stock-exchange listing.
Select Income’s shareholders include Reit Management & Research LLC and Government Properties Income Trust, which together owned 36.8 percent of the outstanding common shares, according to a regulatory filing today.
Reit Management & Research is the external manager of Select Income, Government Properties Trust and Senior Housing Properties Trust.