City Office REIT (CIO) Signs $576M Life-Science Asset Sale Deal


Shares of City Office REIT, Inc. (CIO Quick QuoteCIO ) rallied more than 25% during today’s pre-market trading as the company announced entering into definitive agreements to sell all of its holdings in the Sorrento Mesa submarket of San Diego for $576 million. The announcement came last Friday after market close.

The move comes as part of the company’s strategy to enhance its office portfolio through buyouts in thriving regions through deployment of its sale proceeds. It is particularly targeting acquisitions across some of the highest employment and population growth cities in the south and west.   

James Farrar, the company’s chief executive officer noted, “Since our initial acquisition of properties in Sorrento Mesa in 2017, we have re-positioned, re-tenanted, renovated and strategically enhanced our portfolio.  The resulting aggregation of life science assets and over one million square feet of zoned life science development potential created an extremely valuable portfolio.”

The sales, which will be accomplished pursuant to two separate agreements, are expected to generate net proceeds of roughly $546 million, equating to $12.38 per common share. The properties to be sold are unencumbered by debt.

While the northern portion of the portfolio is slated to close in December 2021 for $395 million, the southern part is scheduled to conclude in February 2023 for $181 million. Moreover, the company has the ability to speed up either of the closing dates to bring into line with redeployment prospects. The sales are subject to customary closing norms.

This REIT, which focuses on acquisition, ownership and operations of high-quality office properties in leading 18-hour cities in the Southern and Western United States, came up with a better-than-expected core funds from operations (FFO) per share of 35 cents in the second quarter on solid top-line numbers.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have outperformed the industry. The stock has gained 11% compared with the industry’s rally of 7.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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