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NEW YORK—Carey Watermark Investors 1 (CWI 1) and Carey Watermark Investors 2 (CWI 2) have entered into a definitive agreement under which the two companies will merge in an all-stock transaction to create Watermark Lodging Trust (WLT), a $4.6 billion, internally-managed non-traded REIT.
CWI 1 and CWI 2 are non-traded REITs managed by affiliates of W. P. Carey Inc. and Watermark Capital Partners. Ultimately WLT is destined for a public listing or an IPO, the company says.
The transaction, which has been approved by the Boards of Directors of CWI 1 and CWI 2, is expected to close in the first quarter of 2020, subject to the approval of stockholders, among other conditions.
Under the merger agreement, CWI 1 stockholders will receive a fixed exchange ratio of 0.9106 shares of CWI 2 Class A common stock for each share of CWI 1 common stock. The exchange ratio is based on the December 31, 2018 net asset values per share of CWI 1 and CWI 2.
CWI 2 will be the surviving entity in the merger and will be renamed Watermark Lodging Trust. WLT's portfolio will consist of 33 lodging assets in markets with high barriers to entry.
The combined REIT will have a more focused portfolio and ultimately position it for the public markets, Michael Medzigian, CEO of CWI 1 and CWI 2, said in prepared remarks.
CWI 1 may solicit and enter into negotiations with third parties through November 21, 2019. The CWI 1 Special Committee plans to alternative proposals during this go-shop period.
Barclays is acting as financial advisor to the CWI 1 Special Committee. Hogan Lovells is acting as legal advisor to the CWI 1 Special Committee. Morgan Stanley & Co. LLC is acting as financial advisor to the CWI 2 Special Committee. Clifford Chance US LLP is acting as legal advisor to CWI 2 and Pepper Hamilton LLP is acting as legal advisor to the CWI 2 Special Committee. Duff and Phelps has rendered a fairness opinion to the CWI 2 Special Committee as to the Internalization.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
