Starwood Reportedly Makes Counter Offer for Monmouth

Starwood Capital Group is reportedly making an unsolicited takeover of  Monmouth Real Estate Investment Corp., which could potentially derail Equity Commonwealth’s proposed offer, according to Bloomberg.

Monmouth announced that it received an unsolicited acquisition proposal from “a large private investment firm primarily focused on global real estate” but didn’t provide the name of the company. The investment firm is offering to buy 100% of the outstanding equity of Monmouth for approximately $18.70 per share.

The firm participated in the strategic alternatives review process undertaken by Monmouth earlier this year and made a proposal to acquire Monmouth as part of that process. The offer also included commitment letters for debt financing and an equity bridge from a global commercial bank, as well as a proposed form of a merger agreement. The investment firm has obtained all necessary internal approvals and has completed its due diligence. Monmouth’s Board of Directors is evaluating the new unsolicited proposal.

In early May, the news came out that Equity Commonwealth was acquiring Monmouth Real Estate Investment in an all-stock transaction for approximately $3.4 billion, including the assumption of debt. The combined company is expected to have a pro forma equity market capitalization of approximately $5.5 billion.

Under the terms of the agreement, Monmouth shareholders will receive 0.67 shares of Equity Commonwealth stock for every share of Monmouth stock they own. Based on the closing price for Equity Commonwealth on May 4, 2021, this represents approximately $19.40 per Monmouth share. 

Equity Commonwealth and Monmouth shareholders are expected to own approximately 65% and 35%, respectively, of the pro forma company following the close of the transaction.

“The transaction provides Equity Commonwealth with a high-quality, net-leased industrial business with stable cash flows while preserving EQC’s balance sheet capacity for future acquisitions,” said Sam Zell, Chairman of the Board of Equity Commonwealth at the time. 

Monmouth’s portfolio consists of 120 properties totaling 24.5 million square feet. In addition, Monmouth has six properties totaling 1.8 million square feet under contract and leased to investment-grade tenants. Closings for these acquisitions are expected in 2021 and 2022.

The transaction is expected to close during the second half of 2021, subject to customary closing conditions, including approval by the common shareholders of both Equity Commonwealth and Monmouth.