MUSE at Torrey Pines. Picture courtesy of Diversified Healthcare Belief
Citing a “difficult backdrop for conventional workplace belongings,” Workplace Properties Earnings Belief has entered right into a definitive merger with Diversified Healthcare Belief, a REIT that owns medical workplace buildings, life science properties and senior housing services, in an all-share transaction that values the mixed firm at $12.4 billion.
The mixed firm would have 539 properties in 40 states and Washington, D.C. Between $2 million and $3 million in price financial savings and synergies yearly are anticipated as soon as the merger is accomplished.
Each REITs are managed by The RMR Group, another asset administration agency primarily based in Newton, Mass. The merger would have to be authorised by OPI and DHC shareholders. It’s anticipated to shut within the third quarter. OPI has secured a dedication from JPMorgan Chase Financial institution, NA for a $368 million bridge mortgage to assist finance the transaction.
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OPI could be the surviving entity within the merger and could be led by the OPI government group and managed by The RMR Group. The REIT expects to alter its title to Diversified Properties Belief upon closing. It might proceed to commerce on the Nasdaq Inventory Trade. OPI shareholders would personal 58 % of the mixed firm and DHC shareholders would personal roughly 42 %.
As of Dec. 31, OPI owned and leased 160 properties with roughly 21 million sq. ft in 30 states and Washington, D.C. Roughly 63 % of its revenues had been from funding grade rated tenants.
As of Dec. 31, DHC’s portfolio was valued at about $7.1 billion and included 379 properties in 36 states and Washington, D.C., occupied by roughly 500 tenants. The portfolio totals about 9 million sq. ft of life science and medical workplace properties and greater than 27,000 senior dwelling models. One in all DHC’s life science properties, Muse at Torrey Pines in San Diego, underwent a $100 million redevelopment two years in the past. The three-building property now has 186,000 sq. ft of collaborative workplace and versatile laboratory house and improved indoor and outside facilities.
Advantages outlined
Christopher Bilotto, OPI’s president & chief working officer, stated in a ready assertion the merger would set up the mixed firm as a bigger, extra diversified REIT that’s higher positioned for long-term development and worth creation for OPI shareholders. He described the DHC holdings as engaging health-care actual property belongings which have a work-from-home resistant tenant base and personal pay senior dwelling communities which can be anticipated to proceed to recuperate following the pandemic and have favorable long-term demographics.
Bilotto stated the merger would give OPI entry to stabilized money flows and NOI development potential from the senior housing portfolio. OPI would additionally profit from extra capital sources, together with Fannie Mae and Freddie Mac. He acknowledged the merger ought to create a stronger and extra resilient mixed firm, with extra diversified income sources and decreased publicity to a weakening workplace market atmosphere.
The merger may also assist DHC strategically and financially, in line with Jennifer Francis, DHC’s president & CEO. DHC has $700 million of debt coming due by mid-2024 and is at the moment not in compliance with its debt covenants. Francis stated in ready remarks the mixed firm could be in quick compliance upon closing and now have quick entry to a number of capital sources which might tackle the upcoming debt maturities and enhance liquidity to proceed funding its senior housing working portfolio and capital enchancment plan.
Transaction advisors
BofA Securities is performing as unique monetary advisor to DHC. Sullivan & Cromwell LLP is the authorized advisor to the particular committee of DHC’s Board of Trustees.
J.P. Morgan Securities LLC is performing as unique monetary advisors to OPI. Wachtell, Lipton, Rosen & Katz is the authorized advisor to the particular committee of OPI’s Board of Trustees.
