#None #Merger Agreement #City Office REIT #MCME Carell

City Office REIT's Strategic Merger Agreement

City Office REIT, Inc. (NYSE: CIO) recently announced a pivotal merger agreement with MCME Carell Holdings, LP and MCME Carell Holdings, LLC. This agreement marks a significant step for City Office, positioning it for potential growth amid challenging market conditions within the office sector.

Details of the Transaction

The merger will see MCME Carell purchasing all the issued and outstanding shares of City Office for $7.00 per share in cash. This transaction is estimated to be valued at approximately $1.1 billion, which includes various financial components such as the assumption of existing debts and the redemption of the Company’s preferred stock. Notably, this offer provides a 26% premium over the closing share price preceding the announcement, as well as a 39% premium based on the average share price over the past 90 days.

James Farrar, CEO of City Office, expressed optimism regarding the merger, stating, "After a comprehensive exploration of strategic options, we are pleased to reach an agreement that delivers immediate value to our shareholders."

Rationale Behind the Merger

The office sector has faced numerous challenges lately, and this merger aims to leverage MCME Carell’s insights into the recovery of high-quality office assets. Mukang Cho, CEO of Morning Calm Management, highlighted the firm’s confidence in acquiring premium office properties situated in robust growth markets. The aim is to optimize assets while navigating the unpredictable landscape of commercial real estate.

Timeline and Approval Process

The transaction is projected to finalize in the fourth quarter of 2025. However, it is contingent on several customary closing conditions, including shareholder approval from City Office. The board of directors has unanimously endorsed the merger proposal. Notably, the transaction will proceed without the necessity of additional financing from the buyer, which bodes well for the potential speed of closure.

Despite this significant shift, City Office will distribute its previously declared second-quarter dividend, commencing on July 24, 2025. However, following the merger approval, future common stock dividend payments are suspended to prepare for the transaction.

Once completed, City Office will transition into a private entity, with its common stock and preferred stock ceasing to trade on the NYSE, a move that mirrors many recent trends in the evolving landscape of real estate investment trusts (REITs).

Advisory Team

The complex financial and legal facets of this transaction were supported by a capable advisory team. Raymond James Associates, Inc. and Jones Lang LaSalle Securities, LLC served exclusively as financial advisors for City Office. DLA Piper LLP (US) acted as special legal counsel for the merger, while Hogan Lovells US LLP provided corporate counsel. Eastdil Secured worked as the financial advisor for the buyers, assisted by Gibson Dunn & Crutcher LLP as their legal counsel.

Conclusion

In summation, City Office REIT's strategic merger agreement with MCME Carell marks a crucial development in its operational evolution amid a challenging office market. The agreement not only promises significant financial returns for shareholders but reflects broader trends in the REIT sector as companies respond to dynamic economic factors. With the proposed adjustments and potential for asset optimization, stakeholders eagerly await the completion of this landmark transaction, anticipating its implications for the future of both entities involved.