Newton-Based Industrial Logistics Properties Trust to Acquire Monmouth Real Estate Investment Corporation for $4.0 Billion

John Murray

NEWTON, MA.–Industrial Logistics Properties Trust announced that it has entered into a definitive agreement to acquire all of the outstanding shares of Monmouth Real Estate Investment Corporation (NYSE: MNR) for $21.00 per share in an all-cash transaction, valued at approximately $4.0 billion, including committed MNR acquisitions, transaction costs and the assumption of $409 million of debt.

The transaction adds 126 new, Class A, single tenant, net leased, e-commerce focused industrial properties to ILPT’s existing high-quality portfolio and improves geographic and tenant diversity.

The portfolio contains over 26 million square feet of space, has a weighted average remaining lease term of approximately 8 years, is over 80% leased to investment grade rated tenants and generates annualized rental revenue of $169.4 million. ILPT expects this transaction to be immediately accretive to Normalized Funds from Operations, or FFO, per share.

John Murray, Chief Executive Officer of ILPT, said: “This transaction adds 126 high-quality industrial assets to ILPT’s portfolio and expands ILPT’s ability to benefit from ongoing strong fundamental tailwinds in the industrial sector. This accretive transaction more than doubles the properties in ILPT’s mainland portfolio and this scale is expected to expand ILPT’s growth opportunities and access to capital which we expect will drive cash flow growth and long-term value for our shareholders.”

Certain highlights of the acquired portfolio include:

  • 126 industrial and logistics properties with approximately 26.3 million rentable square feet.
  • Geographically diverse portfolio across 32 states with an average age of approximately 9 years.
  • 99.7% occupied with a weighted average lease term of approximately 8 years.
  • Over 80% of annual rents come from investment grade tenants.
  • Annualized rental revenue of $169.4 million as of September 30, 2021.
  • Manageable near-term lease expirations average 6.4% of contractual rents per year over the next three years.

Certain expected benefits of the transaction include:

  • Accretive Acquisition – This acquisition is expected to be immediately accretive to Normalized FFO per share. The ultimate amount of accretion will primarily depend on the size and structure of the joint venture used by ILPT to finance this acquisition. The year one cash cap rate on this acquisition is 4.0% and the GAAP cap rate is approximately 4.3%, both of which ILPT believes are higher than could be achieved if the properties were acquired one off in marketed transactions.
  • Complements ILPT’s Existing Portfolio – The acquisition improves ILPT’s mainland portfolio by adding Class A, e-commerce-focused assets, more than 80% of which are leased to investment grade tenants, with a weighted average lease term of approximately 8 years.
  • Increases Scale – ILPT gains significant scale with high quality assets. Larger REITs with high quality portfolios historically gain greater exposure to potential property investment opportunities
  • Adds Geographic Diversity– The acquisition adds geographic diversity for ILPT, particularly in Georgia and Texas where ILPT does not currently own industrial buildings.
  • Enhances Tenant Diversity – The acquisition enhances tenant diversity of ILPT’s existing tenant base, adding new tenant relationships with household names such as Home Depot, International Paper, Mercedes Benz, Toyota and Ulta.
  • Provides Platform for Additional Growth – The acquisition includes an active pipeline both through acquisitions and property expansions which provides ILPT with attractive future growth potential and enhanced tenant retention. It also allows ILPT to continue to nurture MNR’s existing strong relationships with merchant builders, providing a platform for growth in addition to ILPT’s traditional external growth through acquisition and organic growth through its leasing activities.

Deal Structure, Approvals and Timing

To finance this acquisition, ILPT expects to enter into a joint venture with one or more institutional investors for equity investments of between approximately $430 million and $1.3 billion. Accordingly, ILPT does not currently plan to issue common shares in connection with this transaction. ILPT plans to finance the balance of the $4.0 billion purchase with proceeds from new mortgage debt and the assumption of approximately $409 million of existing MNR mortgage debt. Depending on the ultimate size of the joint venture equity investments, ILPT may also use proceeds from the sale of up to approximately $1.6 billion of MNR properties to finance this transaction. Following the closing of the acquisition and execution of the financing plan described above, consolidated net debt to Adjusted EBITDAre is expected to be between 6 and 8 times at year end 2022. To ensure ILPT can finance the closing of this transaction, ILPT has secured commitments from lenders for a $4.0 billion bridge loan facility.

The transaction is subject to customary closing conditions, including MNR shareholder approval, and is expected to close in the first half of 2022.