Workplace Properties Earnings Belief and Diversified Healthcare Belief introduced that they are going to merge to create a diversified REIT with a “broad portfolio, defensive tenant base, and robust progress potential,” the businesses mentioned within the twin bulletins. Particular committees of the boards of trustees of each REITs, comprising unbiased and disinterested trustees, unanimously really helpful the motion. The 2 boards unanimously authorised the merger.
Workplace Properties would be the surviving entity and take the identify Diversified Properties Belief on the shut of the transaction, buying and selling on Nasdaq. The mix will convey wanted range to Workplace Properties in a tough workplace sector market.
“Pursuant to the merger settlement, DHC shareholders will obtain 0.147 shares of OPI for every widespread share of DHC primarily based on a set alternate ratio leading to OPI shareholders proudly owning roughly 58% of the mixed firm, and DHC shareholders proudly owning roughly 42% of the mixed firm,” the bulletins mentioned. This ends in an implied worth of $1.70 per Diversified Properties share, which is a 20% premium to the typical closing worth of its widespread shares for the 30 buying and selling days that ended April 10, 2023.
Workplace Properties board of trustees mentioned that it deliberate to reset money distribution to $0.25 per share per quarter, or $1.00 per share per yr, beginning with the second quarter of 2023. “The brand new distribution charge will enhance monetary flexibility for OPI via the closing of the transaction and for the mixed firm post-closing,” the corporate mentioned.
The brand new charge is a 267% enhance on a professional rata foundation of Diversified Properties’ present distribution degree of $0.01 per share per quarter, or $0.04 per share per yr. “The brand new distribution charge will enhance monetary flexibility for OPI via the closing of the transaction and for the mixed firm post-closing.”
The OPI administration crew will run the corporate and the RMR Group will present property administration. Shareholders need to approve the deal and the merger is anticipated to shut in Q3 of this yr.
“Towards a difficult backdrop for conventional workplace belongings, this merger offers OPI entry to stabilized money flows from DHC’s medical workplace and life science portfolio and NOI progress potential from its senior housing portfolio,” Workplace Properties President and COO Christopher Bilotto mentioned in an announcement. “OPI additionally expects to learn from entry to further capital sources, together with from low-cost government-sponsored sources, comparable to Fannie Mae and Freddie Mac. As well as, the distribution reset will present OPI with elevated monetary flexibility, and the merger is anticipated to be accretive to OPI’s normalized funds from operations and money obtainable for distribution starting within the second half of 2024.”
“The merger with OPI enormously advantages DHC each strategically and financially,” mentioned Diversified Healthcare President and CEO Jennifer Francis. “Strategically, the mixed firm will likely be in quick compliance with debt covenants, have quick entry to a number of capital sources via its larger scale and variety to deal with upcoming debt maturities and enhance liquidity to proceed funding the continued SHOP restoration and capital enchancment plan. Financially, the transaction instantly reduces DHC’s leverage and is straight away accretive to DHC’s normalized funds from operations and money obtainable for distribution, and the anticipated professional rata annual distribution represents a 267% quick enhance for DHC shareholders.”
