Government Properties Income Trust, Select Income REIT To Merge - Quick Facts

(RTTNews) - Government Properties Income Trust (GOV) and Select Income REIT (SIR) said Monday that they have agreed to merge, which will create a real estate investment trust or REIT focused on owning, operating and leasing office buildings primarily leased to single tenants and high credit quality tenants like government entities.

The companies noted that the transaction will eliminate cross ownership and co-dependence on financial results among the companies.

The surviving company in the merger will be GOV and it will change its name to Office Properties Income Trust, or OPI, upon closing the merger. The transaction is expected to close in late 2018 or early 2019, subject to customary closing conditions, including approval by GOV and SIR shareholders.

OPI will continue to be managed by the operating subsidiary of RMR Group Inc. (RMR). OPI will be listed on the Nasdaq and the ticker symbol "OPI" has been reserved for the company's common shares.

The merger will be a stock for stock exchange, whereby SIR shareholders will receive 1.04 shares of GOV for each common share of SIR based upon a fixed exchange ratio. Following the merger, GOV and SIR shareholders will own about 52 percent and 48 percent of OPI, respectively.

As a condition of the merger, GOV will sell all 24.9 million of the common shares it owns in SIR.

In addition, after receiving shareholder approval for the merger and prior to its closing, SIR will distribute as a special dividend all 45 million of the common shares, or the entire 69.2 percent stake, that it owns in ILPT to SIR shareholders.

ILPT is a REIT that is focused on owning warehouse distribution and e-commerce fulfillment facilities throughout the United States.

SIR shareholders will receive about 0.502 shares of ILPT for every one share owned of SIR. Based upon closing prices on September 14, 2018, SIR shareholders will receive $11.69 per share from the ILPT share distribution and $17.57 per share in GOV for a total of $29.26 per share.

OPI expects to pay an annual dividend between $0.50 and $0.60 per share, and also expects to sell properties valued at up to $750 million to reduce leverage.