Government Properties Income Trust (NASDAQ: GOV) shares fell Monday, as the company and Select Income REIT (NASDAQ: SIR) agreed to merge to create a real-estate investment trust.
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. OPI will continue to be managed by the operating subsidiary of The RMR Group Inc. (NASDAQ:RMR).
OPI will be listed on the NASDAQ and the ticker symbol “OPI” has been reserved for the company’s common shares. On an adjusted basis, OPI will own a portfolio of high-quality office buildings.
Mark Kleifges, GOV’s Managing Trustee and Chief Financial Officer, made the following statement about today’s announcement:
"This transaction addresses a number of the challenges that GOV has been facing, including a high dividend payout ratio, a concentration of near term lease expirations and a high tenant concentration.
"We believe GOV shareholders will benefit from this transaction by having a well covered dividend set to a long term sustainable level, extending and better laddering the lease expiration schedule, increasing scale and enhancing diversification. OPI also plans to sell assets post closing to further strengthen its credit metrics."
As a condition of the merger, GOV will sell all 24.9 million of the common shares it owns in SIR. Also as a condition of the merger, 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 it owns in ILPT to SIR shareholders
GOV shares gave way $2.94, or 17.4%, to $13.95, while those in SIR hoisted $2.63, or 13.1%, to $22.69
