Select Income REIT share price down, to acquire Cole Corporate Income Trust in a deal estimated to $3 billion

Select Income REIT reached an agreement over the acquisition of Cole Corporate Income Trust Inc. The cash-and-stock deal is estimated to about $3 billion including the assumption of $298 of mortgage debt. The step will help the company to expand its portfolio in the US by creating an office and industrial net lease REIT.

The purchase must get the approval of both Select Income and CCIT shareholders. According to what the companies have revealed, the deal is expected to be finalized in the first three months of 2015.

According to Select Incomes statement, the company will purchase the full property portfolio of CCIT, which is currently managed by the private capital business of American Realty Capital Properties Inc., called Cole Capital. The portfolio includes 64 office and industrial net-lease properties, as well as 23 health-care properties.

The company also explained that the health-care properties are planned to be sold to Senior Housing Properties Trust for about $539 million, including $509 million in net proceeds and assumed debt estimated to about $30 million. The proceeds from the sale of Coles health-care properties are intended to be used in order to fund the cash portion of the acquisition, and debt.

According to the statement of CCIT, after the completion of the acquisition and the sale of the health-care properties, Select Income is expected to hold 114 properties in 35 states of the U.S. with 43.1 million square feet of space.

CCIT shareholders can choose to receive $10.50 in cash or 0.36 of a Select Income share for each Cole share held. In addition, the company said that it intends to increase its dividend from $1.92 to $2 per share upon finalizing the acquisition.

Select Income REIT fell by 5.18% by 14:40 GMT in New York to trade at $26.46 per share, marking a one-year change of +8.73%. The REIT is valued at $1.67 billion. According to CNN Money, the 3 analysts offering 12-month price forecasts for Select Income REIT have a median target of $28.00, with a high estimate of $29.00 and a low estimate of $27.00. The median estimate represents a +0.36% increase from the previous close of $27.90.