Maryland
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6798
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04-6558834
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Stuart A. Barr, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
801 17th Street, NW
Washington, DC 20006
Tel: (202) 639-7486
Fax: (202) 639-7003
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Jeffrey Lowenthal, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Tel: (212) 806-5400
Fax: (212) 806-6006
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Sam Zell
Chairman of the Board of Trustees
Equity Commonwealth
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Eugene W. Landy
Chairman of the Board of Directors
Monmouth Real Estate Investment Corporation
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1.
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a proposal to approve the issuance of EQC’s common shares of beneficial interest, which we refer to as EQC common shares in connection with the merger, pursuant to the Agreement and Plan of Merger, dated as of May 4, 2021, as it may be amended from time to time, which we refer to as the merger agreement, by and among Equity Commonwealth, Monmouth Real Estate Investment Corporation, and EQC Maple Industrial LLC (f/k/a RS18 LLC) (a copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice), which we refer to as the EQC Issuance Proposal; and
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2.
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a proposal to approve one or more adjournments of the EQC special meeting to another date, time, place, or format, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of EQC’s common shares in connection with the merger, which we refer to as the EQC Adjournment Proposal.
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1.
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a proposal to approve the merger (which we refer to as the merger) of MNR with and into EQC Maple Industrial LLC (f/k/a RS18 LLC) (which we refer to as Merger Sub), a subsidiary of Equity Commonwealth (which we refer to as EQC), pursuant to the Agreement and Plan of Merger, dated as of May 4, 2021, as it may be amended from time to time (which we refer to as the merger agreement), by and among MNR, EQC and Merger Sub, and the other transactions contemplated by the merger agreement, as described in the attached joint proxy statement/prospectus, which we refer to as the MNR Merger Proposal;
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2.
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a non-binding advisory proposal to approve certain compensation that may be paid or become payable to MNR’s five executive officers in connection with the merger agreement and the transactions contemplated thereby, which we refer to as the MNR Compensation Proposal; and
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3.
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a proposal to authorize the board of directors of MNR, which we refer to as the MNR Board, to approve one or more adjournments of the MNR special meeting to another date, time, place, or format, if necessary or appropriate, including to solicit additional proxies in favor of the MNR Merger Proposal, which we refer to as the MNR Adjournment Proposal.
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Michael D. Prashad
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General Counsel and Secretary
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Equity Commonwealth
Two North Riverside Plaza
Suite 2100
Chicago, IL 60606
Attention: Investor Relations
(312) 646-2801
ir@eqcre.com
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Monmouth Real Estate Investment Corporation
Bell Works, 101 Crawfords Corner Road
Suite 1405
Holmdel, NJ 07733
Attention: Investor Relations
(732) 577-9996
mreic@mreic.com
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the “Code” are to the Internal Revenue Code of 1986, as amended;
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the “Combined Company” are to EQC and its consolidated subsidiaries after the closing of the merger, including Merger Sub;
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“Combined Company common shares” are to the common shares of beneficial interest of EQC, $0.01 par value per share, after the closing of the merger;
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“EQC” are to Equity Commonwealth, a Maryland real estate investment trust;
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the “EQC Board” are to the board of trustees of EQC;
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“EQC Bylaws” are to the Fourth Amended and Restated Bylaws of Equity Commonwealth, as amended, restated and supplemented from time to time;
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“EQC common shares” are to the common shares of beneficial interest of EQC, $0.01 par value per share;
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“EQC Declaration of Trust” are to the Articles of Amendment and Restatement of Declaration of Trust of Equity Commonwealth, as amended, restated and supplemented from time to time;
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“EQC Series D preferred shares” are to the 6.50% Series D cumulative convertible preferred shares of beneficial interest of EQC;
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“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
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the “merger” are to a merger of MNR with and into Merger Sub, with Merger Sub surviving the merger;
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the “merger agreement” are to the agreement and plan of merger, dated as of May 4, 2021, by and among EQC, MNR and Merger Sub, as it may be amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference;
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“Merger Sub” are to EQC Maple Industrial LLC (f/k/a RS18 LLC), a Maryland limited liability company and a subsidiary of EQC;
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“MNR” are to Monmouth Real Estate Investment Corporation, a Maryland corporation;
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the “MNR Board” are to the board of directors of MNR;
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MNR Bylaws” are to the Bylaws of Monmouth Real Estate Investment Corporation, as amended and restated April 1, 2014;
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“MNR charter” are to the charter of Monmouth Real Estate Investment Corporation, as filed with the State Department of Assessments and Taxation of Maryland;
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“MNR common shares” are to the shares of common stock of MNR, $0.01 par value per share;
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“MNR restricted stock award” are to each outstanding unvested restricted stock award issued pursuant to a MNR incentive plan;
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“MNR Series C preferred stock” are to the 6.125% Series C Cumulative Redeemable Preferred Stock of MNR;
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“MNR stock option” are to each outstanding option to purchase MNR common shares granted under a MNR equity plan, whether vested or unvested;
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the “NYSE” are to the New York Stock Exchange;
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the “Outside Date” are to November 24, 2021;
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the “SEC” are to the U.S. Securities and Exchange Commission;
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the “Securities Act” are to the Securities Act of 1933, as amended; and
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the “Surviving Entity” are to Merger Sub, a subsidiary of EQC, after the effective time of the merger.
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Q:
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What is the proposed transaction?
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A:
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EQC and MNR have entered into a merger agreement pursuant to which EQC will acquire MNR in an all-stock transaction. Pursuant to, and subject to the terms and conditions of, the merger agreement, MNR will merge with and into Merger Sub, with Merger Sub surviving the merger as a subsidiary of EQC.
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Q:
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What will MNR common shareholders receive in the proposed merger?
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A:
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At the effective time of the merger, each issued and outstanding MNR common share will be converted automatically into the right to receive 0.67 of a newly issued EQC common share, which we refer to as the common stock consideration, with cash paid in lieu of any fractional shares. See “The Merger Agreement—Merger Consideration; Effects of the Merger” beginning on page 117 for detailed descriptions of the common stock consideration and treatment of securities.
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Q:
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What will MNR preferred shareholders receive in the proposed merger?
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A:
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At the effective time of the merger, each issued and outstanding share of MNR Series C preferred stock will be converted automatically into the right to receive an amount in cash equal to $25.00 per share plus accumulated and unpaid dividends, which we refer to as the preferred stock consideration. See “The Merger Agreement—Merger Consideration; Effects of the Merger” beginning on page 117 for detailed descriptions of the preferred stock consideration and treatment of securities.
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Q:
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What will holders of MNR equity awards receive in the proposed merger?
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A:
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At the effective time of the merger, (i) each outstanding option to purchase MNR common shares granted under a MNR equity plan, whether vested or unvested, will be canceled and the holder thereof will be entitled to receive EQC common shares equal to the product of (x) the number of net option shares in respect of such MNR stock option (calculated pursuant to the merger agreement to take into account the exercise price of the MNR stock option and applicable withholding taxes) multiplied by (y) 0.67, or the exchange ratio, and (ii) each outstanding unvested restricted stock award issued pursuant to a MNR incentive plan, which we refer to as a MNR restricted stock award, will be canceled and the holder thereof will receive EQC common shares equal to the product of (x) the number of net restricted stock shares in respect of such MNR restricted stock award (calculated pursuant to the merger agreement to take into account applicable withholding taxes) multiplied by (y) the exchange ratio. See “The Merger Agreement—Merger Consideration; Effects of the Merger” beginning on page 117 and “The Merger— Interests of MNR’s Directors and Executive Officers in the Merger—Treatment of MNR Equity Awards” beginning on page 101 for more information regarding the treatment of MNR equity awards.
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Q:
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Will MNR continue to pay dividends or distributions prior to the closing of the merger?
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A:
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Yes. The merger agreement permits the declaration and payment by MNR of its regular quarterly cash dividend to holders of its common shares and Series C preferred stock, and any distribution that is reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax. In addition to the common dividend MNR paid on June 15, 2021, the merger agreement permits MNR to declare and pay one additional regular quarterly common dividend of $0.18 per share in cash, which the MNR Board declared on July 1, 2021, without triggering EQC’s right to declare and pay a corresponding common dividend to its shareholders. The regular quarterly common dividend declared on July 1, 2021 will be payable to MNR common shareholders on September 15, 2021 (unless the merger is completed prior to September 15, 2021, in which case the dividend payment will be accelerated and paid immediately prior to the effective time of the merger as agreed by EQC and MNR under the terms of the merger agreement).
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Q:
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Will the Combined Company pay dividends or distributions following the closing of the merger?
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A:
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Following closing of the merger, the Combined Company currently expects that it will pay a quarterly common dividend consistent with other industrial REITs. However, the board of trustees of the Combined Company will ultimately determine the timing and amount of any dividends following the closing of the merger.
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Q:
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How will EQC shareholders be affected by the merger and the issuance of EQC common shares in connection with the merger?
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A:
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Upon completion of the merger and after giving effect to the issuance of EQC common shares in connection therewith, EQC estimates that continuing EQC shareholders will own approximately 65% of the issued and outstanding common shares of the Combined Company, and former MNR shareholders will own approximately 35% of the issued and outstanding common shares of the Combined Company.
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Q:
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What happens if the market price of EQC common shares or MNR common shares changes before the closing of the merger?
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A:
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No change will be made to the exchange ratio of 0.67 if the market price of EQC common shares or MNR common shares changes before the closing of the merger. As a result, the value of the consideration to be received by MNR common shareholders at the closing of the merger will increase or decrease depending on the market price of EQC common shares at the effective time of the merger.
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Q:
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Why am I receiving this joint proxy statement/prospectus?
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A:
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The EQC Board and the MNR Board are using this joint proxy statement/prospectus to solicit proxies of EQC shareholders and MNR shareholders in connection with the merger agreement and the merger. In addition, EQC is using this joint proxy statement/prospectus as a prospectus for MNR shareholders because EQC is offering EQC common shares to be issued in connection with the merger.
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EQC shareholders approve the issuance of EQC common shares in connection with the merger by the affirmative vote of at least a majority of the votes cast on the proposal, which we refer to as the EQC Issuance Proposal, and
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MNR shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of at least two-thirds of the MNR common shares outstanding on the record date, which we refer to as the MNR Merger Proposal.
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Q:
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Are shareholders of EQC or MNR being asked to vote on any other proposals at the special meetings in addition to the EQC Issuance Proposal or the MNR Merger Proposal, respectively?
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A:
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EQC. At the EQC special meeting, EQC shareholders will be asked to consider and vote upon the following additional proposal:
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To approve one or more adjournments of the EQC special meeting to another date, time, place, or format if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of EQC common shares in connection with the merger, which we refer to as the EQC Adjournment Proposal.
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A non-binding advisory proposal to approve certain compensation that may be paid or become payable to MNR’s five executive officers in connection with the merger agreement and the transactions contemplated thereby, which we refer to as the MNR Compensation Proposal; and
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To authorize the MNR Board to approve one or more adjournments of the MNR special meeting to another date, time, place, or format, if necessary or appropriate, including to solicit additional proxies
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Q:
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Why are EQC and MNR proposing the merger?
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A:
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The merger provides EQC’s and MNR’s shareholders the opportunity to build a leading industrial business and participate in the long-term growth of the sector. The Combined Company is expected to have a pro forma equity market capitalization of approximately $5.5 billion, based on the closing price of EQC’s common shares on May 4, 2021 of $28.95 per share or approximately $5.1 billion, based on the closing price of EQC’s common shares on July 20, 2021 of $27.07 per share, the latest practicable trading day before the date of this joint proxy statement/prospectus. In addition, the income stability of MNR’s portfolio, coupled with EQC’s sponsorship and strong balance sheet, is expected to provide the Combined Company with stable recurring cash flows and significant capacity for future acquisitions.
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Q:
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Who will be the members of the board of trustees and management of the Combined Company?
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A:
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Following completion of the merger, the board of trustees of the Combined Company will be expanded to 10 members, consisting of (i) all of the members of the EQC Board serving immediately prior to the effective time of the merger, and (ii) Michael P. Landy and Sonal Pande, who have been designated by the MNR Board to serve on the board of trustees of the Combined Company following the completion of the merger in accordance with the terms of the merger agreement, to serve until the next annual meeting of the shareholders of the Combined Company (and until their successors qualify and are duly elected). Sam Zell will continue to serve as Chairman of the board of trustees of the Combined Company.
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Q:
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Will the Combined Company experience any cost savings in connection with the merger?
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A:
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EQC currently expects that, after a transition period following the closing of the merger, the Combined Company’s annual general and administrative (G&A) expense will be similar to EQC’s historical run-rate G&A expense. As the Combined Company’s portfolio grows over time, the Combined Company’s G&A expenses may increase to accommodate that growth.
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Q:
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When and where are the special meetings of the EQC and MNR shareholders?
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A:
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The EQC special meeting is scheduled to be held on August 17, 2021 at 10:00 a.m., Eastern Time in a virtual-only format. The MNR special meeting is scheduled to be held on August 17, 2021 at 11:00 a.m. Eastern Time in a virtual-only format.
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Q:
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Who can vote at the special meeting?
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A:
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EQC. All holders of EQC common shares of record as of the close of business on August 2, 2021, the record date for determining shareholders entitled to notice of and to vote at the EQC special meeting, are entitled to receive notice of and to vote at the EQC special meeting. As of July 16 ,2021, there were 121,940,355 EQC common shares outstanding, held by approximately 1,050 holders of record. Each EQC common share is entitled to one vote on each proposal presented at the EQC special meeting. EQC is commencing solicitation of proxies on or about July 26, 2021, which is before the record date for the EQC special meeting. EQC will continue to solicit proxies until August 17, 2021, the date of the EQC special
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Q:
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Can I deliver my proxy prior to the record date?
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A:
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Proxies delivered prior to the record date will be valid and effective so long as the shareholder providing the proxy is a shareholder of EQC or MNR, as applicable, on the record date. If you are not a holder of record of EQC or MNR, as applicable, on the record date, any proxy you deliver will be ineffective. If you deliver a proxy prior to the record date and remain a holder on the record date, you do not need to deliver another proxy after the record date. If you deliver a proxy prior to the record date and do not revoke that proxy, your proxy will be deemed to cover the number of shares you own on the record date even if that number is different from the number of shares you owned when you executed and delivered your proxy or the number of shares you own as of the date of the special meeting. Proxies received from persons who are not holders of record on the record date will not be effective.
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Q:
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What constitutes a quorum?
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A:
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EQC. The EQC Bylaws provide that the presence in person (which includes presence by means of remote communication at a virtual meeting) or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter constitutes a quorum at a meeting of its shareholders. Shares that are voted and shares abstaining from voting are treated as being present at the EQC special meeting for purposes of determining whether a quorum is present.
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Q:
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What vote is required to approve the proposals?
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A:
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EQC.
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Approval of the EQC Issuance Proposal requires the affirmative vote of at least a majority of the votes cast on such proposal.
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Approval of the EQC Adjournment Proposal requires the affirmative vote of at least a majority of the votes cast on such proposal. If a quorum is not present, the chair of the EQC special meeting may adjourn the meeting.
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Approval of the MNR Merger Proposal requires the affirmative vote of holders of at least two-thirds of the MNR common shares outstanding on the record date.
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Approval of the MNR Compensation Proposal requires, provided a quorum is present, the affirmative vote of at least a majority of all votes cast on such proposal.
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Approval of the MNR Adjournment Proposal, requires, provided a quorum is present, the affirmative vote of at least a majority of all votes cast on such proposal.
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Q:
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How does the EQC Board recommend that EQC shareholders vote on the proposals?
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A:
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After careful consideration, the EQC Board has unanimously (i) determined that the merger agreement and the merger, including the issuance of EQC common shares in connection with the merger, are advisable and in the best interests of EQC and its shareholders, (ii) authorized and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of EQC common shares and the payment of cash consideration to the MNR preferred shareholders in connection with the merger, and (iii) resolved to recommend approval of the issuance of EQC common shares in connection with the merger by the EQC shareholders and that such approval be submitted for consideration at the EQC special meeting. The EQC Board unanimously recommends that EQC shareholders vote FOR the proposal to approve the issuance of EQC common shares in connection with the merger and FOR the proposal to authorize the EQC Board to approve one or more adjournments of the EQC special meeting to another date, time, place, or format, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of EQC common shares in connection with the merger.
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Q:
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How does the MNR Board recommend that MNR shareholders vote on the proposals?
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A:
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After careful consideration, the MNR Board unanimously (i) determined that the merger is advisable and in the best interests of MNR, (ii) approved the merger agreement and the transactions contemplated thereby, including the merger, upon the terms and subject to the conditions set forth therein, and (iii) authorized the execution and delivery by MNR of the merger agreement. The MNR Board unanimously recommends that the MNR shareholders vote FOR the proposal to approve the merger and the other transactions contemplated by the merger agreement, FOR the non-binding advisory proposal to approve certain compensation that may be paid or become payable to MNR’s five executive officers in connection with the merger agreement and the transactions contemplated thereby, and FOR the proposal to approve one or more adjournments of the MNR special meeting to another date, time or place, if necessary or appropriate, including to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement.
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Q:
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Do any of MNR’s executive officers or directors have interests in the merger that may differ from those of MNR shareholders?
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A:
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MNR’s executive officers and directors have interests in the merger that are different from, or in addition to, their interests as MNR shareholders. The members of the MNR Board were aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger, and in recommending that MNR shareholders vote FOR the proposal to approve the merger and the other transactions contemplated by the merger agreement. For a description of these interests, see the section entitled “The Merger—Interests of MNR’s Directors and Executive Officers in the Merger” beginning on page 100 of this joint proxy statement/prospectus.
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Q:
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Are there any conditions to closing of the merger that must be satisfied for the merger to be completed?
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A:
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In addition to the approval of the EQC Issuance Proposal and the MNR Merger Proposal, there are a number of customary conditions that must be satisfied or waived for the merger to be consummated. For a description of all of the conditions to the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 133.
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Q:
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Are there risks associated with the merger that I should consider in deciding how to vote?
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A:
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Yes. There are a number of risks related to the merger that are discussed in this joint proxy statement/prospectus described in the section entitled “Risk Factors” beginning on page 22.
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Q:
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If my EQC common shares or MNR common shares are held in “street name” by my broker or other nominee, will my broker or other nominee vote my EQC common shares or MNR common shares for me?
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A:
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If you hold your EQC common shares or MNR common shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in “street name”), you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank, or nominee. In order for any shares held in street name to be represented at the applicable special meeting, you must provide your broker or other nominee with instructions on how to vote your shares. Brokers who hold EQC common shares and/or MNR common shares on behalf of their customers may not give a proxy to EQC or MNR, as applicable, to vote those shares without specific instructions from their customers.
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Q:
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What will happen if I fail to vote or fail to instruct my broker, bank, or nominee how to vote?
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A:
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EQC. If you are an EQC shareholder and you do not instruct your broker, bank or nominee on how to vote your EQC common shares, your broker, bank or nominee may not vote your shares on the EQC Issuance Proposal or the EQC Adjournment Proposal and your shares will not be deemed to be represented at the EQC virtual special meeting. This will have the same effect as a vote against the EQC Issuance Proposal, but it will have no effect on the EQC Adjournment Proposal.
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Q:
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What will happen if I abstain from voting?
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A:
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EQC. If you are an EQC shareholder and abstain from voting, it will have the same effect as a vote against the EQC Issuance Proposal, but it will have no effect on the EQC Adjournment Proposal.
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Q:
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Will my rights as a shareholder of EQC or MNR change as a result of the merger?
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A:
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The rights of EQC shareholders will be unchanged as a result of the merger. MNR shareholders will have different rights following the effective time of the merger due to the differences between the governing documents of EQC and MNR. For more information regarding the differences in shareholders rights, see “Comparison of Rights of the EQC Shareholders and the MNR Shareholders” beginning on page 144.
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Q:
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When is the merger expected to be completed?
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A:
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EQC and MNR expect to complete the merger as soon as reasonably practicable following satisfaction of all of the required conditions. If EQC shareholders approve the EQC Issuance Proposal, if MNR shareholders approve the MNR Merger Proposal, and if the other conditions to closing the merger are satisfied or waived, it is currently expected that the merger will be completed in the second half of 2021. However, there is no guarantee that the conditions to the merger will be satisfied or that the merger will close on this timing, or at all.
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Q:
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If I am a MNR shareholder do I need to do anything with my stock certificates now?
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A:
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No. You should not submit your stock certificates at this time. After the merger is completed, if you held MNR common shares, the exchange agent for EQC will send you a letter of transmittal and instructions for exchanging your MNR common shares for EQC common shares pursuant to the terms of the merger agreement. Upon surrender of a certificate or book-entry share for cancellation along with the executed letter of transmittal and other required documents described in the instructions, a MNR shareholder will receive EQC common shares pursuant to the terms of the merger agreement.
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Q:
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What are the anticipated U.S. federal income tax consequences to me of the proposed merger?
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A:
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EQC and MNR intend that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. The closing of the merger is conditioned on the receipt by each of EQC and MNR of a written opinion from its respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the merger qualifies as a reorganization, U.S. holders of MNR common shares are not expected to recognize gain or loss for U.S. federal income tax purposes upon the receipt of EQC common shares in exchange for MNR common shares in connection with the merger, except with respect to cash received in lieu of fractional EQC common shares. Holders of MNR common shares should read the discussion under the heading “The Merger—Material U.S. Federal Income Tax Considerations” beginning on page 109 and consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws) of the merger.
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Q:
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Are MNR shareholders entitled to appraisal rights?
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A:
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No. MNR shareholders are not entitled to exercise appraisal rights in connection with the merger. See “The Merger Agreement—Merger Consideration; Effects of the Merger—Appraisal Rights” beginning on page 117 for more information.
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Q:
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What do I need to do now?
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A:
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After you have carefully read this joint proxy statement/prospectus, please respond by completing, signing, and dating your proxy card or voting instruction card and returning it in the enclosed preaddressed postage-paid envelope or, if available, by submitting your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your EQC common shares and/or your MNR common shares will be represented and voted at the EQC special meeting or the MNR special meeting, as applicable.
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Q:
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How will my proxy be voted?
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A:
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EQC. All EQC common shares entitled to vote and represented by properly completed proxies received prior to the EQC special meeting, and not revoked, will be voted at the EQC special meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your EQC common shares should be voted on a matter, the EQC common shares represented by your proxy will be voted as the EQC Board recommends and, therefore FOR the EQC Issuance Proposal, and FOR the EQC Adjournment Proposal. If you do not provide voting instructions to your broker or other nominee, your EQC common shares will NOT be represented at the EQC special meeting and will be considered broker non-votes.
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Q:
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Can I revoke my proxy or change my vote after I have delivered my proxy?
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A:
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Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the EQC special meeting or the MNR special meeting, as applicable. If you are a holder of record, you can do this in any of the three following ways:
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•
|
by sending a written notice to the corporate secretary of EQC or the corporate secretary of MNR, as applicable, in time to be received before the virtual EQC special meeting or the MNR special meeting, as applicable, stating that you would like to revoke your proxy;
|
•
|
by completing, signing and dating another proxy card and returning it by mail in time to be received before the virtual EQC special meeting or the MNR special meeting, as applicable, or by submitting a later dated proxy by the Internet or telephone in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or
|
•
|
by attending the virtual EQC special meeting or the MNR special meeting, as applicable, and voting at the meeting. Simply attending the virtual EQC special meeting or the MNR special meeting, as applicable, without voting will not revoke your proxy or change your vote.
|
Q:
|
What does it mean if I receive more than one set of voting materials for the EQC special meeting or the MNR special meeting?
|
A:
|
You may receive more than one set of voting materials for the EQC special meeting and/or the MNR special meeting, as applicable, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your EQC common shares or your MNR common shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold your EQC common shares or your MNR common shares. If you are a holder of record and your EQC common shares or your MNR common shares are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date, and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or over the Internet.
|
Q:
|
What happens if I am a shareholder of both EQC and MNR?
|
A:
|
You will receive separate proxy cards for each entity and must complete, sign and date each proxy card and return each proxy card in the appropriate pre-addressed postage-paid envelope or, if available, by submitting a proxy by one of the other methods specified in your proxy card or voting instruction card for each entity.
|
Q:
|
Will a proxy solicitor be used?
|
A:
|
Yes. EQC has engaged D.F. King & Co., Inc., which we refer to as D.F. King, to assist in the solicitation of proxies for the EQC special meeting. EQC estimates it will pay D.F. King a fee of approximately $25,000 plus a success fee in an amount to be determined in the discretion of EQC. EQC has also agreed to reimburse D.F. King for reasonable expenses incurred in connection with the proxy solicitation in an amount not to exceed $20,000 and to indemnify D.F. King against certain losses, claims, damages, liabilities and expenses. In addition to mailing proxy solicitation material, EQC’s trustees, officers, and employees may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to EQC’s trustees, officers, or employees for such services.
|
Q:
|
Who can answer my questions?
|
A:
|
If you have any questions about the merger or how to submit your proxy or need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:
|
|
| |
If you are an EQC shareholder:
|
| |
If you are a MNR shareholder:
|
|
| |
Equity Commonwealth
Attention: Investor Relations
Two North Riverside Plaza, Suite 2100
Chicago, IL 60606
(312) 646-2801
Email: ir@eqcre.com
|
| |
Monmouth Real Estate Investment Corporation
Attention: Investor Relations
101 Crawfords Corner Road, Suite 1405
Holmdel, NJ 07733
(732) 577-9996
Email: mreic@mreic.com
|
|
| |
|
| |
|
|
| |
Proxy Solicitor:
D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Call Toll-Free: (877) 783-5524
Call Collect: (212) 269-5550
Email: eqc@dfking.com
|
| |
Proxy Solicitor:
Okapi Partners LLC
1212 Avenue of the Americas, 24th Floor
New York, NY 10036
Call Toll-Free: (877) 796-5274
Email: MNR@okapi.com
|
|
| |
Pro Forma
Equity Market
Capitalization
|
| |
Pro Forma Total
Market
Capitalization(1)
|
May 4, 2021
|
| |
$5.5 billion
|
| |
$6.5 billion
|
July 20, 2021
|
| |
$5.1 billion
|
| |
$6.1 billion
|
(1)
|
Pro Forma Total Market Capitalization is calculated as the Pro Forma Equity Market Capitalization plus total debt and preferred equity, net of the cash-out of the MNR Series C preferred stock in connection with the transaction.
|
•
|
The exchange ratio will not be adjusted to address changes in the market prices of either EQC or MNR common shares.
|
•
|
The merger will dilute the ownership position of EQC shareholders and result in MNR shareholders having an ownership stake in the Combined Company that is smaller than their current stake in MNR.
|
•
|
Completion of the merger is subject to specified conditions and if any of these conditions are not satisfied or waived, the merger will not be completed, which in certain circumstances could result in the requirement that MNR pay EQC a termination fee of approximately $62.2 million.
|
•
|
EQC or MNR may be required to reimburse the other party for its expenses up to $10.0 million if the merger agreement is terminated because EQC’s or MNR’s shareholders, respectively, fail to approve the transactions contemplated by the merger agreement.
|
•
|
Failure to complete the merger could negatively affect the common share prices and future business and financial results of both EQC and MNR.
|
•
|
The pendency of the merger could adversely affect the business and operations of EQC and MNR.
|
•
|
If the merger is not consummated by November 24, 2021, either EQC or MNR may terminate the merger agreement.
|
•
|
Some of the trustees and executive officers of MNR have interests in the merger that are different from, or in addition to, those of the other MNR shareholders.
|
•
|
The board of trustees of the Combined Company will include only two persons designated by the MNR Board.
|
1.
|
a proposal to approve the issuance of EQC common shares in connection with the merger; and
|
2.
|
a proposal to approve one or more adjournments of the EQC special meeting to another date, time, place, or format, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of EQC common shares in the merger.
|
1.
|
a proposal to approve the merger and the other transactions contemplated by the merger agreement;
|
2.
|
a non-binding advisory proposal to approve certain compensation that may be paid or become payable to MNR’s five executive officers in connection with the merger agreement and the transactions contemplated thereby; and
|
3.
|
a proposal to authorize the MNR Board to approve one or more adjournments of the MNR special meeting to another date, time, place, or format, if necessary or appropriate, including to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement.
|
•
|
EQC shareholders approve the issuance of EQC common shares in connection with the merger by the affirmative vote of at least a majority of the votes cast on the proposal;
|
•
|
MNR shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of at least two-thirds of the MNR common shares outstanding on the record date;
|
•
|
approval from the NYSE for the listing of the EQC common shares to be issued in the merger;
|
•
|
the absence of an injunction or law prohibiting the merger;
|
•
|
the absence of any pending, threatened or outstanding government investigation with respect to the merger;
|
•
|
the accuracy of each party’s representations and warranties, subject in most cases to material adverse effect qualifications, and receipt by each party of a certificate to such effect from an officer of the other party;
|
•
|
material compliance by each party with its covenants and agreements;
|
•
|
the absence of any material adverse effect with respect to either EQC or MNR since May 4, 2021;
|
•
|
receipt by EQC and by MNR of an opinion to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of Code and of an opinion as to the qualification of MNR and EQC, respectively, as a real estate investment trust under the Code; and
|
•
|
effectiveness under the Securities Act of the Form S-4 registration statement, of which this joint prospectus/proxy statement forms a part.
|
•
|
the merger is not consummated on or before November 24, 2021 (the Outside Date);
|
•
|
a governmental entity has issued an order or takes any other action permanently restraining, enjoining or otherwise prohibiting the merger and such order or other action becomes final and non-appealable;
|
•
|
the holders of EQC common shares do not cast the requisite number of votes necessary to approve the issuance of EQC common shares in connection with the merger; or
|
•
|
the holders of MNR common shares do not cast the requisite number of votes necessary to approve the merger and the other transactions contemplated by the merger agreement.
|
•
|
MNR breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement that is reasonably incapable of being cured by MNR by November 24, 2021 (the Outside Date) or would result in a failure of any closing condition to the merger; or
|
•
|
prior to the MNR common shareholders having voted upon approval of the merger and the other transactions contemplated by the merger agreement at the MNR special meeting, (i) the MNR Board resolves to or effects a Recommendation Withdrawal (as defined below); (ii) a tender or exchange offer subject to Regulation 14D under the Exchange Act that constitutes a Takeover Proposal is commenced by a person who is not EQC or an affiliate of EQC and the MNR Board does not publicly announce, within ten business days after the commencement of such tender or exchange offer, that MNR recommends rejection of such tender or exchange offer; or (iii) MNR materially breaches its obligations or agreements with respect to the MNR special meeting or non-solicitation.
|
•
|
EQC or Merger Sub breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement that is reasonably incapable of being cured by EQC or Merger Sub by November 24, 2021 (the Outside Date) or would result in a failure of any closing condition to the merger; or
|
•
|
prior to MNR obtaining the requisite approval of the MNR common shareholders, in response to a Takeover Proposal, the MNR Board determines in good faith (after consultation with its financial advisors and outside legal counsel) that such Takeover Proposal constitutes a Superior Proposal.
|
|
| |
Price Per
Common Share
|
| |
Distributions
Declared
Per Share
|
|||
|
| |
High
|
| |
Low
|
| ||
Year Ending December 31, 2019
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$33.55
|
| |
$29.36
|
| |
$0.00
|
Second Quarter
|
| |
$34.01
|
| |
$31.18
|
| |
$0.00
|
Third Quarter
|
| |
$34.63
|
| |
$32.46
|
| |
$3.50
|
Fourth Quarter
|
| |
$34.31
|
| |
$31.02
|
| |
$0.00
|
Year Ending December 31, 2020
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$33.29
|
| |
$28.34
|
| |
$0.00
|
Second Quarter
|
| |
$34.64
|
| |
$31.25
|
| |
$0.00
|
Third Quarter
|
| |
$32.68
|
| |
$26.63
|
| |
$3.50
|
Fourth Quarter
|
| |
$27.54
|
| |
$26.08
|
| |
$0.00
|
Year Ending December 31, 2021
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$29.25
|
| |
$26.55
|
| |
$0.00
|
Second Quarter
|
| |
$28.95
|
| |
$26.20
|
| |
$0.00
|
|
| |
Price Per
Common Share
|
| |
Distributions
Declared
Per Share
|
|||
|
| |
High
|
| |
Low
|
| ||
Fiscal Year Ending September 30, 2019
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$16.41
|
| |
$12.17
|
| |
$0.17
|
Second Quarter
|
| |
$13.92
|
| |
$11.98
|
| |
$0.17
|
Third Quarter
|
| |
$14.25
|
| |
$13.03
|
| |
$0.17
|
Fourth Quarter
|
| |
$14.48
|
| |
$13.00
|
| |
$0.17
|
Fiscal Year Ending September 30, 2020
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$15.45
|
| |
$14.28
|
| |
$0.17
|
Second Quarter
|
| |
$15.40
|
| |
$8.97
|
| |
$0.17
|
Third Quarter
|
| |
$15.24
|
| |
$10.36
|
| |
$0.17
|
Fourth Quarter
|
| |
$15.12
|
| |
$13.09
|
| |
$0.17
|
Fiscal Year Ending September 30, 2021
|
| |
|
| |
|
| |
|
First Quarter
|
| |
$17.84
|
| |
$13.85
|
| |
$0.17
|
Second Quarter
|
| |
$18.66
|
| |
$16.23
|
| |
$0.18
|
Third Quarter
|
| |
$19.6
|
| |
$17.92
|
| |
$0.18
|
|
| |
EQC
Common
Shares
|
| |
MNR
Common
Shares
|
| |
MNR
Pro Forma
Equivalent
|
May 4, 2021
|
| |
$28.95
|
| |
$18.25
|
| |
$19.40
|
July 20, 2021
|
| |
$27.07
|
| |
$19.35
|
| |
$18.14
|
•
|
failure to complete the merger, including due to the failure to obtain the approval of the EQC shareholders or the MNR shareholders required to complete the merger or the failure of EQC or MNR to satisfy another closing condition, could negatively impact each of EQC’s or MNR’s respective stock price and their respective future business and financial results;
|
•
|
the parties expect to incur substantial expenses related to the merger, regardless of whether the merger is ultimately completed; and
|
•
|
the pendency of the merger could adversely affect the business, operations, and financial condition of each of EQC and MNR, including by diverting significant focus of management and other resources or preventing EQC or MNR from undertaking other strategic transactions.
|
•
|
the Combined Company may be unable to successfully integrate MNR’s business;
|
•
|
the Combined Company may be unable to realize the anticipated benefits of the merger;
|
•
|
the future results of the Combined Company will suffer if it does not effectively manage the combined portfolio; and
|
•
|
the market price of the Combined Company’s common shares may decline as a result of the merger.
|
•
|
market reaction to the announcement of the merger and the prospects of the Combined Company;
|
•
|
changes in the respective businesses, operations, assets, liabilities and prospects of EQC and MNR;
|
•
|
changes in market assessments of the business, operations, financial position and prospects of EQC, MNR and/or the Combined Company;
|
•
|
market assessments of the likelihood that the merger will be completed;
|
•
|
interest rates, general market and economic conditions and other factors generally affecting the market prices of EQC common shares or MNR common shares;
|
•
|
federal, state and local legislation, governmental regulation and legal developments in the businesses in which EQC and MNR operate; and
|
•
|
other factors beyond the control of EQC and MNR, including those described or referred to elsewhere in this “Risk Factors” section.
|
•
|
EQC being required to reimburse MNR for its expenses up to $10.0 million if the merger agreement is terminated because EQC’s shareholders fail to approve the issuance of EQC common shares in connection with the merger;
|
•
|
EQC having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;
|
•
|
diversion of EQC management focus and resources from operational matters and other strategic opportunities while working to implement the merger; and
|
•
|
loss of the opportunity to strategically transition the EQC business into the industrial sector.
|
•
|
MNR being required, under certain circumstances, to pay EQC a termination fee of approximately $62.2 million;
|
•
|
MNR being required to reimburse EQC for its expenses up to $10.0 million if the merger agreement is terminated because MNR’s shareholders fail to approve the merger and the other transactions contemplated by the merger agreement;
|
•
|
MNR having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and
|
•
|
diversion of MNR management focus and resources from operational matters and other strategic opportunities while working to implement the merger.
|
•
|
the inability to successfully manage and grow the portfolio in a manner that permits the Combined Company to achieve the benefits anticipated from the merger, in the time frame currently anticipated, or at all;
|
•
|
the inability to successfully realize the anticipated value from some of MNR’s or EQC’s assets;
|
•
|
potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger;
|
•
|
performance shortfalls as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations; and
|
•
|
the possibility that the integration process results in the distraction of the Combined Company’s management, the disruption of its business or inconsistencies in its operations, controls, procedures and policies, any of which could adversely affect the ability of the Combined Company to maintain relationships with tenants, employees and service providers or to achieve the anticipated benefits of the merger, or could otherwise adversely affect the Combined Company’s business, results of operations and financial condition.
|
•
|
a greater number of Combined Company common shares outstanding as compared to the number of EQC common shares currently outstanding;
|
•
|
risks associated with selling the four remaining office properties;
|
•
|
risks associated with the Combined Company managing and growing its industrial portfolio; and
|
•
|
risks associated with the EQC management team managing a different asset class.
|
•
|
decisions on whether, when, and in what amounts to make any future distributions will remain at the sole discretion of the Combined Company’s board of trustees;
|
•
|
dilution of dividends per share due to the Combined Company having more common shares outstanding than MNR;
|
•
|
the Combined Company will be seeking to rapidly grow its industrial business and as a result may desire to retain cash;
|
•
|
the Combined Company’s cash requirements, capital spending plans, cash flow or financial position may limit the amount available for dividends; and
|
•
|
restrictions imposed by state law, state regulators, or the terms of any current or future indebtedness, that the Combined Company and its subsidiaries may incur, including preferred shares, may limit the amount available for dividends.
|
•
|
the success of the Combined Company in implementing its business strategy and its ability to identify, underwrite, finance, consummate and integrate acquisitions or investments;
|
•
|
changes in national, regional and local economic conditions;
|
•
|
changes in financial markets and interest rates, or to the business or financial condition of EQC, MNR or the Combined Company or their respective businesses;
|
•
|
the nature and extent of future competition;
|
•
|
the ability of the Combined Company, to successfully manage its balance sheet, including paying down, refinancing, restructuring and/or extending its indebtedness as it becomes due;
|
•
|
the ability of the Combined Company to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations;
|
•
|
availability to the Combined Company of financing and capital;
|
•
|
the ability of the Combined Company to acquire and manage high quality industrial properties, attract and retain qualified personnel and attract and retain tenants;
|
•
|
the impact of any financial, accounting, legal or regulatory issues or litigation that may affect the Combined Company;
|
•
|
risks associated with successfully managing and growing the Combined Company’s industrial portfolio and achieving the anticipated benefits of the merger; and
|
•
|
risks associated with consummating the merger, the timing of the closing of the merger and unexpected costs or unexpected liabilities that may arise from the merger, whether or not consummated.
|
•
|
the type of properties;
|
•
|
the risk-adjusted returns projected for the properties;
|
•
|
the historical and projected rents received and likely to be received from the properties;
|
•
|
the historical and expected operating expenses, including real estate taxes, incurred and expected to be incurred at the properties;
|
•
|
the growth, tax and regulatory environments of the market in which the properties are located;
|
•
|
the quality and credit worthiness of the tenants as well as the tenants’ intended use of the properties;
|
•
|
occupancy and demand for similar properties in the same or nearby markets;
|
•
|
the construction quality, physical condition and design of the properties, and expected capital expenditures that may need to be made;
|
•
|
the location of the properties; and
|
•
|
the pricing of comparable properties as evidenced by recent market sales.
|
|
| |
|
| |
|
| |
|
| |
As of March 31, 2021
|
|||
Property Name
|
| |
Sector
|
| |
Location
|
| |
Square Feet
|
| |
% Leased
|
| |
Annualized
Rental Revenue
|
1225 Seventeenth Street (17th Street Plaza)
|
| |
Office
|
| |
Denver, CO
|
| |
695,372
|
| |
93.9%
|
| |
$27,632,000
|
Bridgepoint Square
|
| |
Office
|
| |
Austin, TX
|
| |
440,007
|
| |
73.6%
|
| |
$13,077,000
|
1250 H Street
|
| |
Office
|
| |
Washington, DC
|
| |
196,490
|
| |
84.6%
|
| |
$8,361,000
|
206 East 9th Street (Capitol Tower)
|
| |
Office
|
| |
Austin, TX
|
| |
175,510
|
| |
84.3%
|
| |
$8,769,000
|
Period
|
| |
Average Occupancy(1)
|
| |
Average Annualized
Rental Revenue
Per Square Foot
|
2018
|
| |
83.8%
|
| |
$39.03
|
2019
|
| |
86.5%
|
| |
$42.13
|
2020
|
| |
86.4%
|
| |
$42.73
|
First Quarter, 2021
|
| |
89.7%
|
| |
$44.29
|
(1)
|
Average occupancy is the percentage of space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, which includes the space of tenants in a free rent period.
|
Year
|
| |
Number of
Leases Expiring
|
| |
Leased Square
Footage
Expiring(1)
|
| |
% of Leased
Square Footage
Expiring
|
| |
Annualized Rental
Revenue Expiring(2)
|
| |
Cumulative % of
Annualized
Rental Revenue
Expiring(2)
|
2021
|
| |
5
|
| |
41,248
|
| |
6.3%
|
| |
$1,900,179
|
| |
6.9%
|
2022
|
| |
4
|
| |
19,529
|
| |
3.0%
|
| |
$860,883
|
| |
10.0%
|
2023
|
| |
5
|
| |
87,728
|
| |
13.5%
|
| |
$4,156,482
|
| |
25.0%
|
2024
|
| |
10
|
| |
75,724
|
| |
11.6%
|
| |
$3,340,621
|
| |
37.1%
|
2025
|
| |
8
|
| |
120,888
|
| |
18.5%
|
| |
$4,513,821
|
| |
53.5%
|
2026
|
| |
3
|
| |
21,851
|
| |
3.3%
|
| |
$1,024,114
|
| |
57.2%
|
2027
|
| |
4
|
| |
69,576
|
| |
10.7%
|
| |
$2,845,803
|
| |
67.5%
|
2028
|
| |
2
|
| |
51,046
|
| |
7.8%
|
| |
$2,483,801
|
| |
76.5%
|
2029
|
| |
4
|
| |
99,395
|
| |
15.2%
|
| |
$3,671,706
|
| |
89.8%
|
2030
|
| |
2
|
| |
53,858
|
| |
8.2%
|
| |
$2,251,478
|
| |
97.9%
|
Thereafter
|
| |
1
|
| |
12,324
|
| |
1.9%
|
| |
$582,716
|
| |
100.0%
|
(1)
|
Leased square footage as of March 31, 2021 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
|
(2)
|
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight line rent adjustments, abated, or free, rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.
|
Period
|
| |
Average Occupancy(1)
|
| |
Average Annualized
Rental Revenue
Per Square Foot
|
2018
|
| |
88.0%
|
| |
$36.26
|
2019
|
| |
84.7%
|
| |
$38.57
|
2020
|
| |
75.8%
|
| |
$40.62
|
First Quarter, 2021
|
| |
71.1%
|
| |
$41.80
|
(1)
|
Average occupancy is the percentage of space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, which includes the space of tenants in a free rent period.
|
Year
|
| |
Number of
Leases Expiring
|
| |
Leased Square
Footage
Expiring(1)
|
| |
% of Leased
Square Footage
Expiring
|
| |
Annualized Rental
Revenue Expiring(2)
|
| |
Cumulative % of
Annualized
Rental Revenue
Expiring(2)
|
2021
|
| |
5
|
| |
29,101
|
| |
9.0%
|
| |
$1,247,935
|
| |
9.5%
|
2022
|
| |
3
|
| |
10,771
|
| |
3.3%
|
| |
$238,185
|
| |
11.4%
|
2023
|
| |
10
|
| |
103,076
|
| |
31.8%
|
| |
$4,564,224
|
| |
46.3%
|
2024
|
| |
4
|
| |
95,919
|
| |
29.6%
|
| |
$3,653,967
|
| |
74.2%
|
2025
|
| |
1
|
| |
3,933
|
| |
1.2%
|
| |
$175,401
|
| |
75.5%
|
2026
|
| |
3
|
| |
44,691
|
| |
13.8%
|
| |
$1,884,009
|
| |
90.0%
|
2027
|
| |
2
|
| |
32,517
|
| |
10.0%
|
| |
$1,223,752
|
| |
99.3%
|
2028
|
| |
1
|
| |
3,680
|
| |
1.1%
|
| |
$90,160
|
| |
100.0%
|
2029
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
100.0%
|
2030
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
100.0%
|
Thereafter
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
100.0%
|
(1)
|
Leased square footage as of March 31, 2021 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
|
(2)
|
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight line rent adjustments, abated, or free, rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.
|
Period
|
| |
Average Occupancy(1)
|
| |
Average Annualized
Rental Revenue
Per Square Foot
|
2018
|
| |
86.4%
|
| |
$52.20
|
2019
|
| |
86.5%
|
| |
$55.11
|
2020
|
| |
86.1%
|
| |
$58.23
|
First Quarter, 2021
|
| |
76.5%
|
| |
$55.60
|
(1)
|
Average occupancy is the percentage of space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, which includes the space of tenants in a free rent period.
|
Year
|
| |
Number of
Leases Expiring
|
| |
Leased Square
Footage
Expiring(1)
|
| |
% of Leased
Square Footage
Expiring
|
| |
Annualized
Rental Revenue
Expiring(2)
|
| |
Cumulative % of
Annualized
Rental Revenue
Expiring(2)
|
2021
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
0.0%
|
2022
|
| |
3
|
| |
18,032
|
| |
10.8%
|
| |
$940,125
|
| |
11.2%
|
2023
|
| |
3
|
| |
4,420
|
| |
2.7%
|
| |
$256,333
|
| |
14.3%
|
2024
|
| |
1
|
| |
5,017
|
| |
3.0%
|
| |
$272,183
|
| |
17.5%
|
2025
|
| |
2
|
| |
19,758
|
| |
11.9%
|
| |
$950,654
|
| |
28.9%
|
2026
|
| |
2
|
| |
13,953
|
| |
8.4%
|
| |
$784,774
|
| |
38.3%
|
2027
|
| |
4
|
| |
18,444
|
| |
11.1%
|
| |
$892,347
|
| |
49.0%
|
2028
|
| |
1
|
| |
8,235
|
| |
5.0%
|
| |
$500,444
|
| |
55.0%
|
2029
|
| |
2
|
| |
24,164
|
| |
14.5%
|
| |
$1,404,435
|
| |
71.8%
|
2030
|
| |
1
|
| |
4,254
|
| |
2.6%
|
| |
$244,528
|
| |
74.7%
|
Thereafter
|
| |
3
|
| |
49,923
|
| |
30.0%
|
| |
$2,115,617
|
| |
100.0%
|
(1)
|
Leased square footage as of March 31, 2021 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
|
(2)
|
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight line rent adjustments, abated, or free, rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.
|
•
|
A technology security firm leases 20.7% of the rentable square footage of Capitol Tower. The lease, which expires on October 31, 2024, requires the tenant to pay base annual rent of approximately $34.18 per square foot on a monthly basis plus the reimbursement of certain expenses, provides for a 3.0% annual base rent increase and has the option for one 5-year renewal.
|
•
|
A financial services firm leases 14.7% of the rentable square footage of Capitol Tower. The lease, which expires on July 31, 2022, requires the tenant to pay base annual rent of approximately $30.00 per square foot on a monthly basis plus the reimbursement of certain expenses, provides for a $0.75 per square foot annual base rent increase and has the option for one 5-year renewal.
|
•
|
An employee engagement firm leases 14.7% of the rentable square footage of Capitol Tower. In May 2021, the tenant signed an agreement to move to 13,376 square feet on October 1, 2021. The lease was extended from January 31, 2022 to September 30, 2026. The new lease requires the tenant to pay base annual rent of $38.00 per square foot on a monthly basis plus the reimbursement of certain expenses, provides for a 3.0% annual base rent increase and has the option to renew for one 5-year renewal.
|
•
|
A marketing company leases 13.7% of the rentable square footage of Capitol Tower. The lease, which expires on January 31, 2022, requires the tenant to pay base annual rent of approximately $33.75 per square foot on a monthly basis plus the reimbursement of certain expenses, provides for a $1.00 per square foot annual base rent increase.
|
•
|
A cosmetic company leases 11.9% of the rentable square footage of Capitol Tower; however, as of the date of this joint proxy statement/prospectus, the tenant has vacated its space. The lease, which expires on October 31, 2029, requires the tenant to pay base annual rent of approximately $39.14 per square foot on a monthly basis plus the reimbursement of certain expenses, provides for a 3.0% annual base rent increase. Although the tenant has the option to renew for one 5-year period, EQC does not currently expect the tenant to exercise its renewal option.
|
Period
|
| |
Average Occupancy(1)
|
| |
Average Annualized
Rental Revenue
Per Square Foot
|
2018
|
| |
74.4%
|
| |
$47.36
|
2019
|
| |
89.6%
|
| |
$52.65
|
2020
|
| |
95.3%
|
| |
$55.89
|
First Quarter, 2021
|
| |
84.3%
|
| |
$59.25
|
(1)
|
Average occupancy is the percentage of space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, which includes the space of tenants in a free rent period.
|
Year
|
| |
Number of
Leases Expiring
|
| |
Leased Square
Footage
Expiring(1)
|
| |
% of Leased
Square Footage
Expiring
|
| |
Annualized
Rental Revenue
Expiring(2)
|
| |
Cumulative % of
Annualized
Rental Revenue
Expiring(2)
|
2021
|
| |
2
|
| |
13,597
|
| |
9.2%
|
| |
$825,092
|
| |
9.4%
|
2022
|
| |
3
|
| |
75,615
|
| |
51.1%
|
| |
$4,348,980
|
| |
59.0%
|
2023
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
59.0%
|
2024
|
| |
1
|
| |
36,385
|
| |
24.6%
|
| |
$2,160,830
|
| |
83.7%
|
2025
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
83.7%
|
2026
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
83.7%
|
2027
|
| |
1
|
| |
1,452
|
| |
1.0%
|
| |
$86,418
|
| |
84.6%
|
2028
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
84.6%
|
2029
|
| |
1
|
| |
20,939
|
| |
14.1%
|
| |
$1,347,029
|
| |
100.0%
|
2030
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
100.0%
|
Thereafter
|
| |
0
|
| |
0
|
| |
0.0%
|
| |
$0
|
| |
100.0%
|
(1)
|
Leased square footage as of March 31, 2021 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
|
(2)
|
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight line rent adjustments, abated, or free, rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.
|
|
| |
Pro Forma
Equity Market
Capitalization
|
| |
Pro Forma Total
Market
Capitalization(1)
|
May 4, 2021
|
| |
$5.5 billion
|
| |
$6.5 billion
|
July 20, 2021
|
| |
$5.1 billion
|
| |
$6.1 billion
|
(1)
|
Pro Forma Total Market Capitalization is calculated as the Pro Forma Equity Market Capitalization plus total debt and preferred equity, net of the cash-out of the MNR Series C preferred stock in connection with the transaction.
|
1.
|
a proposal to approve the issuance of EQC common shares in connection with the merger, which we refer to as the EQC Issuance Proposal; and
|
2.
|
a proposal to approve one or more adjournments of the EQC special meeting to another date, time, place, or format, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of EQC common shares in the merger, which we refer to as the EQC Adjournment Proposal.
|
•
|
Internet. EQC shareholders may submit a proxy over the Internet by going to www.proxyvote.com. Once at the website, they should follow the instructions to submit a proxy.
|
•
|
Telephone. EQC shareholders may submit a proxy using the toll-free number at 1-800-690-6903 and follow the recorded instructions. EQC shareholders will be asked to provide the control number from the enclosed proxy card.
|
•
|
Mail. EQC shareholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.
|
1.
|
a proposal to approve the merger and the other transactions contemplated by the merger agreement, which we refer to as the MNR Merger Proposal;
|
2.
|
a non-binding advisory proposal to approve certain compensation that may be paid or become payable to MNR’s five executive officers in connection with the merger agreement and the transactions contemplated thereby, which we refer to as the MNR Compensation Proposal; and
|
3.
|
a proposal to authorize the MNR Board to approve one or more adjournments of the MNR special meeting to another date, time, place, or format, if necessary or appropriate, including to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement, which we refer to as the MNR Adjournment Proposal.
|
•
|
Internet. MNR shareholders of record may submit a proxy over the Internet by going to www.OkapiVote.com/MNR. Once at the website, they should follow the instructions to submit a proxy.
|
•
|
Telephone: MNR shareholders of record may submit a proxy using the toll-free number at 866-494-4435 and follow the recorded instructions. MNR shareholders will be asked to provide the control number from the enclosed proxy card.
|
•
|
Mail: MNR shareholders of record may submit a proxy by completing, signing, dating, and returning the enclosed white proxy card in the preaddressed postage-paid envelope provided.
|
•
|
sending a written notice to the corporate secretary of EQC or the corporate secretary of MNR, as applicable, in time to be received before the virtual EQC special meeting or the MNR special meeting, as applicable, stating that you would like to revoke your proxy;
|
•
|
completing, signing and dating another proxy card and returning it by mail in time to be received before the virtual EQC special meeting or the MNR special meeting, as applicable, or by submitting a later dated proxy by the Internet or telephone in which case your later submitted proxy will be recorded any your earlier proxy revoked; or
|
•
|
attending the virtual EQC special meeting or the MNR special meeting, as applicable, and voting at the meeting. Simply attending the virtual EQC special meeting or the MNR special meeting, as applicable, without voting will not revoke your proxy or change your vote.
|
•
|
The Transaction Delivers Significant Strategic and Financial Benefits. The EQC Board believes that the merger will provide a number of significant potential strategic and financial benefits, including the following:
|
•
|
Attractive Entry Point into the Industrial Sector to Build a Long-Term Business: The merger provides EQC shareholders an attractive entry point into the industrial sector as well as a platform to build a leading industrial business, a fast-growing sector with robust long-term fundamentals driven by the growth of e-commerce.
|
•
|
High-Quality Modern Portfolio: The MNR portfolio is comprised of newer properties, consisting of single tenant, net-leased industrial assets, the vast majority of which are leased to investment grade companies or their subsidiaries with long weighted average lease terms. The portfolio is primarily located in the Eastern United States with locations near airports, seaports, transportation hubs, and situated within or near major population centers, positioning the portfolio well to serve both the first and last mile of the supply chain. With a weighted average building age of 9.9 years,1 much of the portfolio consists of Class A logistics facilities with modern building features.
|
•
|
Scale, Stability and Potential for Significant Growth: The MNR portfolio generates a base of strong stable cash flows, and the merger provides the Combined Company the opportunity to build a leading industrial business with approximately $5 billion of balance sheet capacity for future acquisitions that the EQC Board believes will provide long-term net asset value accretion to shareholders.
|
•
|
Fully-Funded Growth Strategy: The Combined Company’s growth strategy is not dependent on raising additional equity capital. After closing, the Combined Company is expected to have approximately $2.4 billion of pro forma cash on the balance sheet, as well as four office properties totaling 1.5 million square feet that are planned to be sold over time with the proceeds reinvested into new industrial acquisitions.
|
•
|
Improved Balance Sheet: In connection with the merger, EQC will cash out MNR’s $550 million Series C preferred stockholders for $25.00 per share plus accrued dividends, which will create immediate savings for the Combined Company of approximately $34 million per annum. Going forward, the Combined Company anticipates having a strong balance sheet and a conservative financing strategy with long-term leverage targets in line with the industrial REIT sector.
|
•
|
Improved Access to Capital: Given the Combined Company’s leadership team, its history of conservative balance sheet management and the intention to grow the portfolio, the Combined Company is expected to benefit from improved access to capital as it considers opportunities for debt financing to provide flexibility and lower borrowing costs. In addition, after closing, the increase in shares outstanding for the Combined Company is expected to provide increased liquidity for shareholders.
|
•
|
Increased Diversification Over Time: With approximately $5 billion of balance sheet capacity, the Combined Company has the opportunity to make investments in industrial real estate assets where strong fundamentals offer compelling risk-adjusted returns and opportunities for long-term value creation. The Combined Company currently plans to diversify its tenant base and industry concentrations as the industrial portfolio grows.
|
•
|
Strong Corporate Governance and Leadership: EQC’s commitment to strong corporate governance that promotes transparency as well as alignment with and accountability to shareholders will continue at the Combined Company. Sam Zell will remain the Chairman of the Board of Trustees of the Combined Company, which will continue to be led by EQC’s President and Chief Executive Officer David Helfand and the existing EQC senior management team. Following completion of
|
1
|
As of March 31, 2021 and excludes the 60,400 square foot Carlstadt property which was sold on April 15, 2021.
|
•
|
Fixed Exchange Ratio. The EQC Board also considered that the fixed exchange ratio, which will not fluctuate as a result of changes in the market prices of EQC common shares or MNR common shares, provides certainty as to the respective pro forma ownership of the Combined Company.
|
•
|
Opinion of Financial Advisor. The EQC Board considered the oral opinion of Goldman Sachs delivered to the EQC Board on May 4, 2021, subsequently confirmed by delivery of a written opinion, dated May 4, 2021, to the EQC Board, and attached to this joint proxy statement/prospectus as Annex B, to the effect that, as of the date of Goldman Sachs’ written opinion, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion as set forth therein, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to EQC; for additional information, see the section entitled “The Merger—Opinion of EQC’s Financial Advisor” and the full text of the written opinion of Goldman Sachs attached as Annex B to this joint proxy statement/prospectus.
|
•
|
EQC and MNR Commitment to Completing the Merger. The EQC Board considered the commitment on the part of both parties to complete the merger as reflected in their respective obligations under the terms of the merger agreement, and the likelihood that the shareholder approvals needed to complete the merger would be obtained in a timely manner.
|
•
|
the risk of diverting management focus and resources from other strategic opportunities while working to implement the merger;
|
•
|
the risk that, notwithstanding EQC’s and MNR’s commitment to completing the merger, the merger may not be completed, or that completion may be unduly delayed, including the effect of the pendency of the merger and the effect such failure to be completed may have on the trading price of EQC common shares and operating results, particularly in light of the costs incurred in connection with the proposed transaction;
|
•
|
the risk that, under the terms of the merger agreement, EQC must reimburse MNR for its expenses up to $10.0 million in the event the merger agreement is terminated because EQC’s shareholders fail to approve the issuance of EQC common shares in connection with the merger;
|
•
|
the risk associated with the fact that the merger represents a strategic transition for EQC’s business into the industrial sector, and, while the Combined Company expects to have access to the appropriate resources, relationships and expertise to manage and grow the business, there can be no assurance of success;
|
•
|
the risk that the Combined Company may not be able to find attractive sale opportunities for the remaining office properties in connection with EQC’s strategic transition into the industrial sector;
|
•
|
the risk that the anticipated strategic and financial benefits of the merger may not be realized;
|
•
|
the risk of other potential challenges in integrating the two companies and their respective operations;
|
•
|
the substantial costs to be incurred in connection with the transaction, including the transaction expenses arising from the merger and the costs of integrating the businesses of EQC and MNR;
|
•
|
the restrictions on the conduct of EQC’s business prior to the completion of the merger, which could delay or prevent EQC from undertaking certain actions it would otherwise take with respect to its business absent the pending completion of the merger; and
|
•
|
other matters described under the section “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
|
•
|
the receipt of EQC common shares as merger consideration provides MNR common shareholders with the opportunity to maintain an ownership stake in the Combined Company, which is expected to provide a number of significant potential strategic opportunities and benefits, including the following:
|
○
|
shareholders of the Combined Company will have the opportunity to benefit as the Combined Company seeks to build a leading industrial real estate business and thereby to continue to participate in the long-term growth of the industrial real estate sector;
|
○
|
the income stability of the Combined Company’s property portfolio, which is expected to consist of MNR’s 122 properties and EQC’s four office properties based on the expected timing for closing of the merger and the expected timing for two of MNR’s pending acquisitions, coupled with EQC’s sponsorship, management expertise and strong balance sheet, is expected to provide shareholders of the Combined Company with stable recurring cash flows and significant financial resources to pursue future acquisitions;
|
○
|
EQC is well-positioned to execute on the Combined Company’s growth strategy, which is not dependent on raising additional debt or equity capital, as the Combined Company is expected to have approximately $2.4 billion of cash on its balance sheet following the closing of the merger;
|
○
|
MNR’s common shareholders are expected to benefit from a strengthened balance sheet, as MNR’s outstanding Series C preferred stock will be paid off in connection with the merger, resulting in immediate preferred dividend savings of approximately $34 million per year;
|
○
|
shareholders of the Combined Company will benefit from increased tenant and industry diversification, as EQC plans to broaden MNR’s tenant base and reduce MNR’s industry concentrations as the portfolio grows;
|
○
|
the Combined Company is expected to have significant cost of capital advantages as a result of its strong balance sheet and access to liquidity; and
|
○
|
MNR’s common shareholders are expected to benefit from a significant increase in market liquidity given the Combined Company’s expected $5.5 billion public equity market capitalization based on the closing price of EQC’s common shares on May 4, 2021 of $28.95 per share or approximately $5.1 billion, based on the closing price of EQC’s common shares on July 20, 2021 of $27.07 per share, the latest practicable trading day before the date of this joint proxy statement/prospectus.
|
•
|
the EQC common shares to be issued in the merger had an implied value per MNR common share of $19.40 based on the closing price of EQC common shares on the NYSE on May 4, 2021, the day the merger agreement was entered into and publicly announced;
|
•
|
the merger agreement permits MNR to continue to pay MNR’s common shareholders regular quarterly cash dividends of up to $0.18 per MNR common share through consummation of the merger, and, because EQC has agreed not to declare or pay any equalizing dividends to its common shareholders with respect to (i) the regular quarterly common dividend of $0.18 per share previously declared by the MNR Board and paid on June 15, 2021 and (ii) the regular quarterly common dividend of $0.18 per share declared by the MNR Board on July 1, 2021 and payable on September 15, 2021 (unless the merger is completed prior to
|
•
|
the exchange ratio in the merger is fixed and will not fluctuate as a result of changes in the market value of MNR common shares or EQC common shares, which provides certainty as to the pro forma percentage ownership of MNR common shareholders in the Combined Company and limits the impact of external factors on the merger;
|
•
|
the common stock consideration, consisting of EQC common shares, which will be listed for trading on the NYSE, will continue to provide liquidity for MNR common shareholders desiring to monetize their investment after the merger;
|
•
|
the financial analyses presented to the MNR Board by each of J.P. Morgan and CSCA and the May 4, 2021 oral opinions delivered by J.P. Morgan and CSCA to the MNR Board, which were confirmed by delivery of written opinions dated May 4, 2021, to the effect that, as of May 4, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered, and limitations on the review undertaken by J.P. Morgan and CSCA in preparing their respective opinions, the exchange ratio in the merger (in the case of J.P. Morgan) or the common stock consideration to be received by MNR common shareholders pursuant to the merger agreement (in the case of CSCA) was fair, from a financial point of view, to MNR common shareholders, as more fully described below in the section entitled “The Merger—Opinions of MNR’s Financial Advisors” beginning on page 78 of this joint proxy statement/prospectus and as set forth in the full text of the respective fairness opinions, which are attached as Annex B and Annex C, respectively, to this joint proxy statement/prospectus;
|
•
|
the robust pre-signing strategic alternatives sale process conducted by J.P. Morgan and CSCA at the direction and under the supervision of the Strategic Alternatives Committee of the MNR Board, which involved outreach to more than 90 qualified potential interested parties, including financial sponsors, real estate investment trusts, sovereign wealth funds, pension funds, real estate managers and other financial and strategic investors, the execution of non-disclosure agreements with 36 potential counterparties, and the receipt of first round indications of interest from four potential counterparties, second round proposals from three potential counterparties and “best and final” proposals from each of EQC and Bidder A;
|
•
|
the merger is intended to qualify as a reorganization for U.S. federal income tax purposes, resulting in the receipt by MNR common shareholders of EQC common shares in the merger on a tax-efficient basis;
|
•
|
immediately following the closing of the merger, the EQC Board will consist of ten trustees, two of whom will be persons designated by the MNR Board, which will provide former MNR common shareholders with continuing representation on the EQC Board;
|
•
|
the quality, breadth and experience of EQC’s senior management team, which has successfully completed and integrated other acquisitions;
|
•
|
favorable conditions for sale transactions in the industrial real estate market generally, including prices for assets being at or near historical highs while capitalization rates are at or near historical lows, the moderate interest rate environment and the possibility that interest rates may rise in the near future;
|
•
|
information with respect to the business, operating results, financial condition and future plans of EQC, including the substantial amount of cash on its balance sheet and EQC’s intention to sell its office properties and focus its activities on industrial real estate following the merger;
|
•
|
the approval of the merger by the holders of at least two-thirds of the outstanding MNR common shares required by Maryland corporation law and the approval of the issuance of EQC common shares in the merger by at least a majority of the votes cast on the proposal by EQC shareholders as required by NYSE rules;
|
•
|
the ability of the MNR Board under the merger agreement, under certain specified circumstances, to consider an alternative proposal and the right of the MNR Board, under certain specified circumstances, to withdraw its recommendation and to terminate the merger agreement following such withdrawal in order to enter into an agreement with respect to a Superior Proposal, subject to payment by MNR of an approximately $62 million termination fee, as well as the right of the MNR Board, under certain specified circumstances, to withdraw its recommendation following the occurrence of an Intervening Event;
|
•
|
the commitment on the part of each of MNR and EQC to complete the merger as reflected in their respective obligations under the terms of the merger agreement, the fact that there are no financing or diligence conditions to consummation of the merger, the absence of any required material governmental consents (other than the Form S-4 Registration Statement of which this joint proxy statement/prospectus is a part being declared effective by the SEC), the fact that the November 24, 2021 outside date under the merger agreement should allow sufficient time to complete the merger, the belief that the shareholder approvals required to complete the merger would be obtained in a timely manner, and the fact that MNR is entitled to specific performance of EQC’s obligations under the merger agreement;
|
•
|
the other terms of the merger agreement, including representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the merger agreement;
|
•
|
the proposed terms of the merger and the merger agreement as compared to the proposals received from other bidders, including Bidder A; and
|
•
|
the course of negotiations with EQC, which were conducted at arm’s length and during which the MNR Board and the MNR Strategic Alternatives Committee were advised by MNR’s legal and financial advisors.
|
•
|
that, because the exchange ratio is fixed in the merger agreement and will not fluctuate as a result of changes in the market value of MNR common shares or EQC common shares, a decline in the value of EQC common shares unmatched by a similar decline in the value of MNR common shares, or an increase in the value of MNR common shares without a similar increase in the value of EQC common shares, would reduce the relative value of the EQC common shares received by MNR common shareholders in the merger;
|
•
|
the risk that the dividend per share expected to be paid by the Combined Company following the consummation of the merger may be significantly lower than the dividend per share historically paid by MNR;
|
•
|
that, following the merger, MNR would no longer exist as a stand-alone public company and MNR shareholders would not participate in any future growth MNR might have achieved on a stand-alone basis;
|
•
|
the risk that the strategic, financial and other benefits to the MNR shareholders expected to result from the merger might not be fully realized or realized at all, including as a result of possible changes in the real estate market or the industrial real estate business affecting the markets in which EQC will operate or as a result of potential difficulties integrating the two companies and their respective operations;
|
•
|
the risk that an alternative transaction or different strategic alternative potentially could be more beneficial to MNR shareholders than the proposed merger with EQC;
|
•
|
that, under the terms of the merger agreement, MNR must pay EQC an approximately $62 million termination fee if the merger agreement is terminated under certain circumstances or if an alternative transaction is consummated under certain circumstances following termination of the merger agreement, which might discourage or deter other parties from proposing an alternative transaction that may be more advantageous to MNR shareholders;
|
•
|
that the terms of the merger agreement place limitations on the ability of MNR to initiate or solicit, or knowingly facilitate or encourage the making of any proposal or offer that constitutes or would reasonably be expected to lead to a Takeover Proposal (as defined below) or engage in or otherwise participate in any discussions or negotiations that would reasonably be expected to lead to a Takeover Proposal (as defined below), or provide any access to its properties, books or records or any non-public information to any person relating to MNR or any of its subsidiaries in connection with the foregoing;
|
•
|
the risk that the required approval of MNR shareholders and/or EQC shareholders for the merger and the other transactions contemplated by the merger agreement (in the case of MNR shareholders) or the issuance of EQC common shares in the merger (in the case of EQC shareholders) may not be obtained;
|
•
|
the risk that one or more of the other conditions to the parties’ obligations to complete the merger will not be satisfied or waived;
|
•
|
the risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the merger and the risk that if the merger is not completed, MNR’s employees will have expended extensive time and efforts to complete the transaction and will have experienced significant distractions from their work during the pendency of the transaction, which would adversely affect MNR’s business;
|
•
|
the possibility that the merger may not be completed, or may be unduly delayed, for reasons beyond the control of MNR or EQC;
|
•
|
provisions in the merger agreement restricting operation of MNR’s business during the period between the signing of the merger agreement and consummation of the merger may delay or prevent MNR from undertaking business opportunities that may arise or other actions MNR would otherwise take with respect to its operations absent the pending completion of the merger;
|
•
|
the expenses to be incurred in connection with the merger;
|
•
|
MNR’s obligation under the merger agreement to reimburse EQC for up to $10.0 million of transaction expenses incurred by EQC if the merger is not completed due to the failure of MNR shareholders to approve the merger and the other transactions contemplated by the merger agreement;
|
•
|
the fact that under Maryland law, MNR shareholders are not entitled to dissenters or appraisal rights in connection with the merger; and
|
•
|
the types and nature of the risks described under the section entitled “Risk Factors” beginning on page 22 of this joint proxy statement/prospectus.
|
•
|
the merger agreement;
|
•
|
the annual reports to shareholders and Annual Reports on Form 10-K of EQC and MNR for the five fiscal years ended December 31, 2020 and September 30, 2020, respectively;
|
•
|
certain interim reports to shareholders and Quarterly Reports on Form 10-Q of EQC and MNR;
|
•
|
certain other communications from EQC and MNR to their respective shareholders;
|
•
|
certain publicly available research analyst reports for EQC and MNR;
|
•
|
certain internal financial analyses and forecasts for MNR prepared by its management (shown by the management of EQC on a pro forma basis for the sale of a specified asset, using EQC’s projection for the specified asset) and approved for Goldman Sachs’ use by EQC, which we refer to as the “MNR Forecasts;”
|
•
|
certain internal financial analyses and forecasts for EQC on a stand-alone and pro forma basis, giving effect to the merger, in each case, as prepared by the management of EQC and approved for Goldman Sachs’ use by EQC, which we refer to collectively, together with the MNR Forecasts, as the “Forecasts;” and
|
•
|
certain operating synergies projected by the management of EQC to result from the merger, as approved for Goldman Sachs’ use by EQC, which we refer to as the “Synergies” for purposes of this section “ —Opinion of EQC’s Financial Advisor.”
|
•
|
reviewed a draft dated May 4, 2021 of the merger agreement;
|
•
|
reviewed certain publicly available business and financial information concerning MNR and EQC and the industries in which they operate;
|
•
|
compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
|
•
|
compared the financial and operating performance of MNR and EQC with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of MNR common shares and EQC common shares and certain publicly traded securities of such other companies;
|
•
|
reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of MNR and EQC relating to the respective businesses, as discussed more fully under “—Certain MNR Unaudited Prospective Financial Information” beginning on page 97 of this joint proxy statement/prospectus, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the merger, which we refer to as the “Synergies” for purposes of this section “ —Opinions of MNR’s Financial Advisors—Opinion of J.P. Morgan”; and
|
•
|
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
|
•
|
STAG Industrial, Inc.
|
•
|
Lexington Realty Trust
|
•
|
Cousins Properties Incorporated
|
•
|
Highwoods Properties, Inc.
|
•
|
Piedmont Office Realty Trust, Inc.
|
•
|
Franklin Street Properties Corp.
|
|
| |
Implied Per Share Equity Value
|
|||
|
| |
Low
|
| |
High
|
MNR P/2021E AFFO
|
| |
$15.25
|
| |
$19.25
|
MNR P/2021E FFO
|
| |
$14.25
|
| |
$20.00
|
MNR Implied Capitalization Rate
|
| |
$15.00
|
| |
$18.25
|
|
| |
Implied Per Share Equity Value
|
|||
|
| |
Low
|
| |
High
|
EQC Implied Capitalization Rate
|
| |
$26.50
|
| |
$28.00
|
|
| |
Implied Per Share Equity Value
|
|||
|
| |
Low
|
| |
High
|
MNR Discounted Cash Flow
|
| |
$12.75
|
| |
$20.50
|
EQC Discounted Cash Flow
|
| |
$27.75
|
| |
$29.00
|
|
| |
Implied Exchange Ratios
|
|||
|
| |
Low
|
| |
High
|
Implied Capitalization Rate
|
| |
0.536x
|
| |
0.689x
|
Discounted Cash Flow
|
| |
0.440x
|
| |
0.739x
|
•
|
Reviewed the (i) audited financial information for MNR for the twelve-month periods ended September 30, 2018, 2019, and 2020, respectively, (ii) draft financial information for MNR for the three-month and six-month periods ended March 31, 2021, respectively, as provided on April 29, 2021, (iii) unaudited financial information for MNR for the three-month and six-month periods ended March 31, 2020, and (iv) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization of MNR, all of the foregoing as prepared and provided by MNR management;
|
•
|
Reviewed the (i) audited financial information for EQC for the twelve-month periods ended December 31, 2018, 2019, and 2020, respectively, (ii) draft financial information for EQC for the three-month period ended March 31, 2021 as provided on April 27, 2021, (iii) unaudited financial information for EQC for the three-month period ended March 31, 2020, and (iv) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization of EQC, all of the foregoing as prepared and provided by EQC management;
|
•
|
Reviewed certain publicly available audited and unaudited financial statements and other publicly available business, financial and other information of MNR, including but not limited to the Annual Report filed on Form 10-K for the fiscal year ended September 30, 2020 and related supplementary financial information thereto, and the Quarterly Report on Form 10-Q and related supplementary information for each of the fiscal quarters ended December 31, 2020, June 30, 2020 and March 31, 2020;
|
•
|
Reviewed certain publicly available audited and unaudited financial statements and other publicly available business, financial and other information of EQC, including but not limited to the Annual Report filed on Form 10-K for the fiscal year ended December 31, 2020 and related supplementary financial information thereto, and the Quarterly Report on Form 10-Q and related supplementary information for each of the fiscal quarters ended September 30, 2020, June 30, 2020 and March 31, 2020;
|
•
|
Reviewed other non-public financial and operating information of MNR, including detailed 5-year financial projections prepared by management, information relating to its existing leases, existing debt and related prepayment penalties, historical capital expenditures and related projections, historical re-leasing history and related projections, pending property acquisitions (as to which there can be no assurance of such acquisitions closing) and related leases and financing, among others, as discussed more fully under “—Certain MNR Unaudited Prospective Financial Information” beginning on page 97 of this joint proxy statement/prospectus;
|
•
|
Reviewed other non-public financial and operating information relating to EQC's commercial real estate assets, including but not limited to rent rolls and 10-year property level projections for its office portfolio, among others;
|
•
|
Reviewed drafts of the merger agreement, the most recent draft dated May 3, 2021, and each of MNR and EQC’s disclosure schedules thereto, the most recent draft dated May 4, 2021;
|
•
|
Compared certain publicly available financial information of MNR with similar publicly available information of other comparable publicly traded industrial and net lease REITs, as CSCA deemed relevant to its analyses;
|
•
|
Compared certain publicly available and non-publicly available financial information of EQC with publicly available information of other comparable publicly traded office REITs, as CSCA deemed relevant to its analyses;
|
•
|
Reviewed the terms, to the extent publicly available, of certain comparable transactions, and compared such terms to the terms of the merger, as CSCA deemed relevant to its analysis;
|
•
|
Reviewed the stock price history of each of MNR and EQC and compared such prices to the terms of the merger, as CSCA deemed relevant to its analysis;
|
•
|
Performed various financial analyses as CSCA deemed appropriate, using generally accepted analytical valuation methodologies; and
|
•
|
Performed such other analyses, inquiries and investigations and consideration of such other factors as CSCA deemed appropriate for the purposes of its opinion, including its knowledge of the REIT, industrial and office real estate sectors, as well as its experience in connection with similar transactions and securities valuation generally.
|
•
|
W.P. Carey Inc.;
|
•
|
STAG Industrial, Inc.;
|
•
|
Lexington Realty Trust; and
|
•
|
Broadstone Net Lease, Inc.
|
Industrial Peer Group
|
| |
Low
|
| |
Mean
|
| |
Median
|
| |
High
|
Implied Cash Capitalization Rate
|
| |
6.1%
|
| |
5.7%
|
| |
5.7%
|
| |
5.3%
|
Price / CY 2021E FFO
|
| |
14.1x
|
| |
16.3 x
|
| |
16.4 x
|
| |
18.4 x
|
Price / CY 2021E AFFO
|
| |
15.5 x
|
| |
17.5 x
|
| |
16.9 x
|
| |
20.6 x
|
Prem/(Disc.) to NAV
|
| |
6.6%
|
| |
12.9%
|
| |
13.7%
|
| |
17.8%
|
|
| |
MNR
Metrics
|
| |
Industrial
Peer Group
Metrics
|
| |
Implied
Equity Value
Per Share
|
Implied Cash Capitalization Rate
|
| |
$170
|
| |
5.3% - 6.1%
|
| |
$11.85 - $16.28
|
Price / CY 2021E FFO
|
| |
$0.87
|
| |
14.1x – 18.4x
|
| |
$12.35 - $16.09
|
Price / CY 2021E AFFO
|
| |
$0.83
|
| |
15.5x – 20.6x
|
| |
$12.91 - $17.11
|
Prem/(Disc.) to NAV
|
| |
$16.90
|
| |
6.6% - 17.8%
|
| |
$17.97 - $19.85
|
•
|
Cousins Properties Incorporated;
|
•
|
Highwoods Properties, Inc.;
|
•
|
Corporate Office Properties Trust;
|
•
|
Brandywine Realty Trust; and
|
•
|
Piedmont Office Realty Trust, Inc.
|
Office Peer Group
|
| |
Low
|
| |
Mean
|
| |
Median
|
| |
High
|
Implied Cash Capitalization Rate
|
| |
7.3%
|
| |
6.4%
|
| |
6.2%
|
| |
5.7%
|
|
| |
EQC
Metric
|
| |
Office
Peer Group
Metrics
|
| |
Implied
Equity Value
Per Share
|
Implied Cash Capitalization Rate
|
| |
$30
|
| |
5.7% - 7.3%
|
| |
$26.23 - $27.13
|
|
| |
MNR
Implied Equity
Value Per Share
|
| |
Implied
Exchange
Ratio
|
| |
Common Stock
Consideration
|
High
|
| |
$19.85
|
| |
0.6928 x
|
| |
|
Low
|
| |
$11.85
|
| |
0.4138 x
|
| |
0.67 x
|
Date Announced
|
| |
Acquiror
|
| |
Target
|
May 2018
|
| |
The Blackstone Group LP
|
| |
Gramercy Property Trust
|
July 2015
|
| |
Global Logistics Properties Limited
|
| |
Industrial Income Trust Inc.
|
Precedent Transactions
|
| |
High
|
| |
Low
|
Implied Cash Capitalization Rate
|
| |
5.1%
|
| |
6.1%
|
|
| |
MNR
Metric
|
| |
Implied
Cash Capitalization
Rates
|
| |
Implied
Equity Value
Per Share
|
Implied Cash Capitalization Rate
|
| |
$170
|
| |
5.1% - 6.1%
|
| |
$11.73 - $17.32
|
|
| |
Implied Equity
Value Per Share
|
| |
MNR
Exchange
Ratio
|
| |
Implied
Common Stock
Consideration
|
High
|
| |
$17.32
|
| |
0.6046 x
|
| |
|
Low
|
| |
$11.73
|
| |
0.4093 x
|
| |
0.67 x
|
|
| |
MNR
Metric
|
| |
Implied
Cash Capitalization
Rates
|
| |
Implied
Equity Value
Per Share
|
Capitalization Rate Valuation Analysis - MNR
|
| |
$170
|
| |
4.75% - 5.50%
|
| |
$14.90 - $19.81
|
|
| |
EQC
Metric
|
| |
Implied
Cash Capitalization
Rates
|
| |
Implied
Equity Value
Per Share
|
Capitalization Rate Valuation Analysis - EQC
|
| |
$30
|
| |
4.50% - 6.00%
|
| |
$26.94 - $28.29
|
|
| |
MNR
Implied Equity
Value Per Share
|
| |
EQC
Implied Equity
Value Per Share
|
| |
Implied
Exchange
Ratio
|
| |
Common Stock
Consideration
|
High
|
| |
$19.81
|
| |
$28.29
|
| |
0.7354 x
|
| |
|
Low
|
| |
$14.90
|
| |
$26.94
|
| |
0.5267 x
|
| |
0.67 x
|
|
| |
MNR
Metrics
|
| |
Premium Range
(25th to 75th Percentile)
|
| |
Implied
Equity Value
Per Share
|
1-Day
|
| |
$16.99
|
| |
12.4% - 19.7%
|
| |
$19.10 - $20.34
|
5-Day
|
| |
$16.16
|
| |
12.1% - 21.0%
|
| |
$18.12 - $19.55
|
2-Week
|
| |
$15.22
|
| |
12.0% - 23.5%
|
| |
$17.04 - $18.80
|
30-Day
|
| |
$14.16
|
| |
15.9% - 26.7%
|
| |
$16.40 - $17.94
|
|
| |
MNR
Implied Equity
Value Per Share
|
| |
Implied
Exchange
Ratio
|
| |
Common Stock
Consideration
|
High
|
| |
$20.34
|
| |
0.7100x
|
| |
|
Low
|
| |
$16.40
|
| |
0.5726x
|
| |
0.67x
|
Terminal Value Range
|
| |
Discount Rate
|
| |
Implied Equity
Value Per Share
|
18.0 x – 22.0 x
|
| |
6.00% - 6.50%
|
| |
$12.75 - $19.86
|
Terminal Value Range
|
| |
Discount Rate
|
| |
Implied Equity
Value Per Share
|
14.0 x – 16.0 x
|
| |
6.75% - 7.25%
|
| |
$26.83 - $27.43
|
|
| |
MNR
Implied Equity
Value Per Share
|
| |
EQC
Implied Equity
Value Per Share
|
| |
Implied
Exchange
Ratio
|
| |
Common Stock
Consideration
|
High
|
| |
$19.86
|
| |
$27.43
|
| |
0.7401 x
|
| |
|
Low
|
| |
$12.75
|
| |
$26.83
|
| |
0.4649 x
|
| |
0.67 x
|
•
|
total net operating income of approximately $32 million in 2021, $41 million in 2022 and $47 million in 2023;
|
•
|
interest income at an annual interest rate of 0.2%;
|
•
|
general and administrative expense of approximately $31 million in each of 2021 and 2022 and $32 million in 2023;
|
•
|
capital expenditure of approximately $16 million in 2021, $22 million in 2022 and $14 million in 2023;
|
•
|
no property acquisitions or dispositions in the projected period; and
|
•
|
no issuances or repayment of common equity, preferred equity or debt in the projected period.
|
•
|
total net operating income growth of 10.8% in 2022, 8.0% in 2023, 7.5% in 2024 and 6.7% in 2025;
|
•
|
general and administrative expense of approximately $10 million in each of 2021, 2022 and 2023, and approximately $11 million in each of 2024 and 2025;
|
•
|
acquisitions and expansion projects of $222 million in 2021, $238 million in 2022, $225 million in each of 2023 and 2024, $169 million in 2025, at an average capitalization rate of 5.6% in 2021, 5.4% in 2022 and 5.0 – 5.5% in 2023 to 2025 for acquisitions and 10% stabilized yields on cost for expansion projects;
|
•
|
the issuance of $100 million in unsecured notes in 2021 at an annual interest rate of 2.50% and new secured debt each year representing approximately 65% of acquisition costs at an annual interest rate of 2.75%;
|
•
|
redemption of 6.125% Series C Preferred Stock of $225 million in 2021, $100 million in each of 2022 to 2024 and $25 million in 2025 and the issuance of new preferred equity of $150 million in 2021, $19 million in 2022 and $75 million in each of 2023 to 2025; and
|
•
|
the issuance of new common shares of approximately $60 million in 2021, $101 million in 2022, $110 million in 2023 and $125 million in each of 2024 and 2025.
|
•
|
an assumed closing date for the merger of March 31, 2021;
|
•
|
the issuance of 66.1 million EQC common shares as merger consideration;
|
•
|
the assumption by EQC of MNR’s existing debt;
|
•
|
the cash out of MNR’s 6.125% Series C Preferred Stock using EQC’s cash on balance sheet at closing, resulting in an interest savings of $34 million per year;
|
•
|
$96 million of transaction costs funded with cash on balance sheet at closing;
|
•
|
the sale of EQC’s office properties in 2022 for gross proceeds of $750 million and MNR’s securities portfolio post completion of the merger;
|
•
|
general and administrative expense of approximately $41 million in 2021, $39 million in 2022, $32 million in 2023 and annual growth of 2.5% thereafter for the projected period;
|
•
|
contracted acquisitions of $119 million in 2021 and $80 million in 2022, at an average capitalization rate of 5.8%, and new acquisitions of industrial properties of $1.6 billion in each of 2022 and 2023 and $600 million in 2024, all at a capitalization rate of 4.5% with same-store net operating income growth of 3.5% per year; and
|
•
|
no issuance of new common equity or preferred equity.
|
($ thousands)
|
| |
2021
|
| |
2022
|
| |
2023
|
Net Operating Income(1)
|
| |
$31,588
|
| |
$41,140
|
| |
$46,686
|
EBITDA(2)
|
| |
901
|
| |
9,788
|
| |
14,366
|
Adjusted EBITDA(3)
|
| |
7,760
|
| |
16,629
|
| |
21,217
|
Funds from Operations(“FFO”)(4)
|
| |
(876)
|
| |
8,062
|
| |
12,729
|
Unlevered Free Cash Flow(5)
|
| |
(16,790)
|
| |
(15,082)
|
| |
(103)
|
(1)
|
Net operating income as used by EQC is a non-GAAP measure and is defined as income from real estate including lease termination fees received from tenants less property operating expenses.
|
(2)
|
Earnings before interest income (including any dividend income from securities) and expense, taxes, depreciation and amortization, which we refer to as EBITDA.
|
(3)
|
Adjusted EBITDA defined as EBITDA plus interest income and dividend income from securities.
|
(4)
|
FFO, or Funds from Operations, is calculated in accordance with standards established by the National Association of Real Estate Investment Trusts, or Nareit. Nareit defines FFO as net income (loss), calculated in accordance with GAAP, excluding real estate depreciation and amortization, gains (or losses) from sales of depreciable property, impairment of depreciable real estate, and the portion of these items related to equity investees and non-controlling interests.
|
(5)
|
Unlevered Free Cash Flow was arithmetically derived from the EQC management forecasts by making adjustments (including straight-line rent adjustment, income tax expense, capital expenditure, acquisitions and dispositions) to EBITDA and provided by EQC management to Goldman Sachs and approved for Goldman Sachs’ use by the EQC Board.
|
($ thousands)
|
| |
2021
|
| |
2022
|
| |
2023
|
| |
2024
|
| |
2025
|
Net Operating Income(1)
|
| |
$161,150
|
| |
$178,494
|
| |
$192,746
|
| |
$207,117
|
| |
$220,908
|
EBITDA(1)
|
| |
151,581
|
| |
168,524
|
| |
182,277
|
| |
196,124
|
| |
209,508
|
Adjusted EBITDA(1)
|
| |
156,964
|
| |
172,780
|
| |
185,405
|
| |
198,126
|
| |
210,664
|
FFO(1)
|
| |
86,347
|
| |
103,040
|
| |
117,973
|
| |
132,224
|
| |
145,715
|
Unlevered Free Cash Flow(2)
|
| |
(75,303)
|
| |
(74,175)
|
| |
(47,581)
|
| |
(33,753)
|
| |
35,853
|
(1)
|
See definitions of terms in the footnotes to the above table regarding the EQC management forecasts relating to EQC on a Stand-alone Basis.
|
(2)
|
See definition of term in the footnote to the above table regarding EQC’s estimated unlevered free cash flow.
|
($ thousands)
|
| |
2021
|
| |
2022
|
| |
2023
|
| |
2024
|
Net Operating Income(1)
|
| |
$190,728
|
| |
$247,042
|
| |
$291,579
|
| |
$341,747
|
EBITDA(1)
|
| |
150,041
|
| |
208,191
|
| |
259,258
|
| |
308,618
|
Adjusted EBITDA(1)
|
| |
155,735
|
| |
212,625
|
| |
261,614
|
| |
308,976
|
FFO(1)
|
| |
110,283
|
| |
166,432
|
| |
208,655
|
| |
244,658
|
Unlevered Free Cash Flow(2)
|
| |
(9,852)
|
| |
(824,252)
|
| |
(1,398,594)
|
| |
(329,888)
|
(1)
|
See definitions of terms in the footnotes to the above table regarding the EQC management forecasts relating to EQC on a Stand-alone Basis.
|
(2)
|
See definition of term in the footnote to the above table regarding EQC’s estimated unlevered free cash flow.
|
|
| |
Fiscal Year Ending September 30,
|
||||||||||||
|
| |
2021E
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
|
| |
($ in millions, except per share values)
|
||||||||||||
Cash Net Operating Income (Cash NOI)(1)
|
| |
$153
|
| |
$173
|
| |
$187
|
| |
$202
|
| |
$217
|
Adjusted EBITDA (ex. Interest/Dividend Income)(2)
|
| |
$147
|
| |
$165
|
| |
$179
|
| |
$193
|
| |
$207
|
FFO per Share(3)
|
| |
$0.84
|
| |
$0.96
|
| |
$1.05
|
| |
$1.12
|
| |
$1.18
|
AFFO per Share(4)
|
| |
$0.80
|
| |
$0.93
|
| |
$1.03
|
| |
$1.10
|
| |
$1.16
|
|
| |
Calendar Year Ending December 31,
|
||||||||||||
|
| |
2021E
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
|
| |
($ in millions, except per share values)
|
||||||||||||
Cash Net Operating Income (Cash NOI)(1)
|
| |
$159
|
| |
$177
|
| |
$191
|
| |
$206
|
| |
$219
|
Adjusted EBITDA (ex. Interest/Dividend Income)(2)
|
| |
$152
|
| |
$169
|
| |
$183
|
| |
$196
|
| |
$210
|
FFO per Share(3)
|
| |
$0.87
|
| |
$0.99
|
| |
$1.07
|
| |
$1.14
|
| |
$1.19
|
AFFO per Share(4)
|
| |
$0.83
|
| |
$0.96
|
| |
$1.05
|
| |
$1.12
|
| |
$1.17
|
(1)
|
MNR defines net operating income (“NOI”) as Net Income (Loss), as such term is defined under GAAP, attributable to MNR’s common stockholders, plus preferred dividends, general and administrative expenses, non-recurring costs relating to MNR’s strategic alternative process and proxy fight (including litigation and certain other non-routine costs), depreciation, amortization of capitalized lease costs and intangible assets and interest expense, including amortization of financing costs, unrealized holding (gains) or losses arising during the periods, less dividend income, gain on sale of securities transactions, and lease termination income. The components of NOI consist of recurring rental and reimbursement revenue, less real estate taxes and operating expenses, such as insurance, utilities, and repairs and maintenance. MNR defines Cash NOI as NOI as adjusted to exclude the impact of certain GAAP adjustments included in rental revenue, such as straight-line rent adjustments and amortization of above-market intangible lease assets and below-market lease intangible liabilities.
|
(2)
|
MNR defines adjusted EBITDA (“Adjusted EBITDA”) as Net Income (Loss) attributable to MNR’s common stockholders, plus preferred dividend expense, interest expense, including amortization of financing costs, depreciation, amortization of capitalized lease costs and intangible assets, and unrealized holding losses arising during the relevant period, less gain on sale of securities transactions and gain on sale of real estate investments. The Adjusted EBITDA item set forth in the tables above also excludes interest and dividend income.
|
(3)
|
MNR defines funds from operations (“FFO”) as such term is defined by The National Association of Real Estate Investment Trusts (Nareit). Nareit defines FFO as net income attributable to common shareholders, as defined under GAAP, excluding extraordinary items, as defined under GAAP, gains or losses from sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization. Included in the Nareit FFO White Paper - 2018 Restatement, is an option pertaining to assets incidental to our main business in the calculation of Nareit FFO to make an election to include or exclude mark-to-market changes in the value recognized on these marketable equity securities. In conjunction with the adoption of the FFO White Paper - 2018 Restatement, for all periods presented, MNR has elected to exclude unrealized gains and losses from its investments in marketable equity securities from our FFO calculation. Nareit created FFO as a non-GAAP supplemental measure of REIT operating performance.
|
(4)
|
MNR defines adjusted funds from operations (“AFFO”) as FFO as adjusted to exclude stock-based compensation expense, depreciation of corporate office tenant improvements, amortization of deferred financing costs, gains on the sale of securities, lease termination income, non-recurring costs relating to MNR’s strategic alternative process & proxy fight (including litigation and certain other non-routine costs), effect of non-cash GAAP straight-line rent adjustments and less recurring capital expenditures. Recurring capital expenditures are defined as all capital expenditures that are recurring in nature, excluding capital expenditures related to expansions at MNR’s existing properties or capital expenditures that are incurred in conjunction with obtaining a new lease or a lease renewal.
|
Name
|
| |
Positions
|
Kiernan Conway
|
| |
Independent Director
|
Daniel D. Cronheim
|
| |
Independent Director
|
Catherine B. Elflein
|
| |
Independent Director
|
Brian H. Haimm
|
| |
Lead Independent Director
|
Neal Herstik
|
| |
Independent Director
|
Matthew I. Hirsch
|
| |
Independent Director
|
Eugene. W. Landy
|
| |
Founder, Chairman of the Board and Director
|
Michael P. Landy
|
| |
President, Chief Executive Officer and Director
|
Samuel A. Landy
|
| |
Director
|
Kevin S. Miller
|
| |
Chief Financial Officer, Chief Accounting Officer and Director
|
Richard P. Molke
|
| |
Vice President of Asset Management
|
Gregory T. Otto
|
| |
Independent Director
|
Sonal Pande
|
| |
Independent Director
|
Michael D. Prashad
|
| |
General Counsel and Corporate Secretary
|
Scott L. Robinson
|
| |
Independent Director
|
|
| |
MNR Unvested Restricted
Stock Awards
|
| |
MNR Stock Options
|
|||||||||||||||
|
Number
of
Unvested
MNR
Restricted
Shares
(#)*
|
| |
Aggregate
Value of
Unvested
MNR
Restricted
Shares
($)*
|
| |
Number
of EQC
Shares
Issuable
in Respect
of
Unvested
MNR
Restricted
Shares
(#)*
|
| |
Number
of Vested
and
Unvested
MNR
Stock
Options
(#)
|
| |
Aggregate
Value of
Vested and Unvested
MNR Stock Options
($)*
|
| |
Net Option
Shares (Prior
to the
Application of
Taxes) (#)*
|
| |
Number of
EQC Shares
Issuable in
Respect of Net
Option Shares
(#)*
|
||
MNR Executive Officers
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Eugene W. Landy
|
| |
10,724
|
| |
204,509
|
| |
7,185
|
| |
520,000
|
| |
2,949,700
|
| |
154,678
|
| |
103,634
|
Michael P. Landy
|
| |
23,594
|
| |
449,935
|
| |
15,808
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Kevin S. Miller
|
| |
485
|
| |
9,246
|
| |
325
|
| |
65,978
|
| |
338,474
|
| |
17,749
|
| |
11,892
|
Michael D. Prashad
|
| |
—
|
| |
—
|
| |
—
|
| |
45,000
|
| |
235,350
|
| |
12,341
|
| |
8,269
|
Richard P. Molke
|
| |
—
|
| |
—
|
| |
—
|
| |
30,000
|
| |
162,900
|
| |
8,542
|
| |
5,723
|
MNR Non-Employee Directors
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Kiernan Conway
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Daniel D. Cronheim
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Catherine B. Elfein
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
| |
MNR Unvested Restricted
Stock Awards
|
| |
MNR Stock Options
|
|||||||||||||||
|
Number
of
Unvested
MNR
Restricted
Shares
(#)*
|
| |
Aggregate
Value of
Unvested
MNR
Restricted
Shares
($)*
|
| |
Number
of EQC
Shares
Issuable
in Respect
of
Unvested
MNR
Restricted
Shares
(#)*
|
| |
Number
of Vested
and
Unvested
MNR
Stock
Options
(#)
|
| |
Aggregate
Value of
Vested and Unvested
MNR Stock Options
($)*
|
| |
Net Option
Shares (Prior
to the
Application of
Taxes) (#)*
|
| |
Number of
EQC Shares
Issuable in
Respect of Net
Option Shares
(#)*
|
||
Brian H. Haimm
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Neal Herstik
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Matthew I. Hirsch
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Samuel A. Landy
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Gregory T. Otto
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Sonal Pande
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Scott L. Robinson
|
| |
485
|
| |
9,246
|
| |
325
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
•
|
a closing date for the merger of June 15, 2021;
|
•
|
the consummation of the merger constitutes a “change in control” for purposes of each applicable plan or agreement;
|
•
|
a qualifying termination of the executive officer’s employment (e.g., a termination by MNR without “cause” or by the executive officer for “good reason”, or in the case of Eugene Landy, any termination of his employment, in connection with the change in control), on June 15, 2021); and
|
•
|
a price per MNR common share of $19.07, which equals the average closing price of MNR common shares over the first five business days following May 4, 2021, the date on which the merger was publicly announced.
|
Name
|
| |
Cash
($)(1)
|
| |
Equity
($)(2)
|
| |
Perquisites/Benefits
($)(3)
|
| |
Other
($)(4)
|
| |
Total
($)(5)
|
Eugene W. Landy
|
| |
500,000
|
| |
374,159
|
| |
52,916
|
| |
3,453,500
|
| |
4,380,575
|
Michael P. Landy
|
| |
3,739,869
|
| |
449,935
|
| |
128,919
|
| |
—
|
| |
4,318,723
|
Kevin S. Miller
|
| |
1,719,900
|
| |
9,246
|
| |
44,100
|
| |
—
|
| |
1,773,246
|
Michael D. Prashad
|
| |
550,000
|
| |
—
|
| |
40,191
|
| |
—
|
| |
590,191
|
Richard P. Molke
|
| |
550,000
|
| |
—
|
| |
68,998
|
| |
—
|
| |
618,998
|
(1)
|
The amounts in this column represent the cash severance to which MNR’s executive officers may become entitled under his employment agreement or pursuant to the CIC Plan, as applicable, with MNR, as described in the section above entitled “Management Agreements” beginning on page 116 of this joint proxy statement/prospectus.
|
Name
|
| |
Salary
Severance
($)
|
| |
Bonus
Severance
($)
|
| |
Total Cash
Severance
($)
|
Eugene W. Landy
|
| |
500,000
|
| |
—
|
| |
500,000
|
Michael P. Landy
|
| |
2,734,869
|
| |
1,005,000
|
| |
3,739,869
|
Kevin S. Miller
|
| |
1,719,900
|
| |
—
|
| |
1,719,900
|
Michael D. Prashad
|
| |
550,000
|
| |
—
|
| |
550,000
|
Richard P. Molke
|
| |
550,000
|
| |
—
|
| |
550,000
|
(2)
|
The amounts in this column represent the amounts payable pursuant to the merger agreement to each MNR executive officer in respect of the unvested MNR restricted stock awards and unvested MNR stock options held by such executive officer as of June 15, 2021, as described in the section above entitled “Treatment of MNR Equity Awards” beginning on page 101 of this joint proxy statement/prospectus. The amounts shown are based on the equity award holdings of each such executive officer on June 15, 2021, but do not include vested stock options and the merger consideration paid in respect of cancellation thereof. The amounts shown do not take into account any dividends, additional issuances, vesting events or forfeitures of equity-based awards following June 15, 2021.
|
Name
|
| |
Number of
Unvested
Shares of
Restricted
Stock
(#)*
|
| |
Value of
Unvested
Shares of
Restricted
Stock
($)*
|
| |
Number of
Shares
Subject to
Unvested
Stock
Options
(#)
|
| |
Value of
Unvested
Options
($)
|
| |
Number of
Shares
Subject to
Vested
Options
(#)
|
| |
Value of
Vested
Options
($)
|
| |
Total
(Unvested
Awards)
($)*
|
| |
Total
(Vested and
Unvested
Awards)
($)*
|
Eugene W. Landy
|
| |
10,724
|
| |
204,509
|
| |
65,000
|
| |
169,650
|
| |
455,000
|
| |
2,780,050
|
| |
374,159
|
| |
3,154,209
|
Michael P. Landy
|
| |
23,594
|
| |
449,935
|
| |
—
|
| |
—
|
| |
0
|
| |
—
|
| |
449,935
|
| |
449,935
|
Kevin S. Miller
|
| |
485
|
| |
9,246
|
| |
—
|
| |
—
|
| |
65,978
|
| |
338,474
|
| |
9,246
|
| |
347,720
|
Michael D. Prashad
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
45,000
|
| |
235,350
|
| |
—
|
| |
235,350
|
Richard P. Molke
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
30,000
|
| |
162,900
|
| |
—
|
| |
162,900
|
*
|
For purposes of this table, the numbers and values in respect of shares have been rounded to the nearest whole number.
|
(3)
|
The amounts in this column represent the estimated value of the continued health care coverage benefits following termination of employment without cause to which each MNR executive officer, other than Mr. Miller, may become entitled under his employment agreement or the CIC Severance Plan, as applicable, as described in the section above entitled “Management Agreements” beginning on page 103 of this joint proxy statement/prospectus. Additionally, the amounts reflect a lump-sum payment equal to the executive officer’s accrued but unused vacation to which they would be entitled upon termination in accordance with the terms of their respective employment agreements, in the case of Eugene Landy, Michael Landy and Mr. Miller, or the terms of MNR’s vacation policy for employees, in the case of Messrs. Molke and Prashad.
|
Name
|
| |
COBRA/HealthCare
Continuation
($)
|
| |
Accrued
Vacation
($)
|
| |
Total Perquisites/Other
Benefits
($)
|
Eugene W. Landy
|
| |
11,521
|
| |
41,394
|
| |
52,916
|
Michael P. Landy
|
| |
58,793
|
| |
70,125
|
| |
128,918
|
Kevin S. Miller
|
| |
—
|
| |
44,100
|
| |
44,100
|
Michael D. Prashad
|
| |
19,037
|
| |
21,154
|
| |
40,191
|
Richard P. Molke
|
| |
47,844
|
| |
21,154
|
| |
68,998
|
(4)
|
The amount in this column with respect to Eugene Landy represent the transaction bonus to which he is entitled under his employment agreement with MNR as described in the section above entitled “Management Agreements” beginning on page 103 of this joint proxy statement/prospectus. Upon the effective time of the merger, pursuant to his employment agreement, Eugene Landy is entitled to (i) a lump-sum payment of $2,500,000 (provided that the sale price is at least $10 per share of MNR common shares, which condition will be satisfied with respect to the merger) and (ii) if the merger results in a significant increase in MNR’s market capitalization, a grant of between 35,000 and 65,000 MNR common shares. For purposes of this disclosure, it has been assumed that Mr. Landy will be entitled to receive 50,000 MNR common shares pursuant to the provision described in clause (ii) of the preceding sentence, and the value of such shares is based on a per share price of MNR common shares of $19.07, which is equal to the volume weighted average closing price of MNR common shares over the first five trading days following May 4, 2021, the date of public announcement of the merger. This column does not reflect any transaction bonus payments to executives under the Transaction Bonus Program as the recipients of such bonus payments are not known at the time of filing of this joint proxy statement / prospectus with the SEC.
|
Name
|
| |
Cash Transaction Bonus
Payments
($)
|
| |
Equity Transaction
Bonus Payments
($)
|
| |
Total “Other”
Payments
($)
|
Eugene W. Landy
|
| |
2,500,000
|
| |
953,500
|
| |
3,453,500
|
Michael P. Landy
|
| |
—
|
| |
—
|
| |
—
|
Kevin S. Miller
|
| |
—
|
| |
—
|
| |
—
|
Michael D. Prashad
|
| |
—
|
| |
—
|
| |
—
|
Richard P. Molke
|
| |
—
|
| |
—
|
| |
—
|
|
| |
MNR Common Shares
|
| |
MNR Series C Preferred Stock
|
||||||
Name and Address
of Beneficial Owner
|
| |
Amount and
Nature
of Beneficial
Ownership(1)
|
| |
Percentage
of Common
Shares
Outstanding(2)
|
| |
Amount and
Nature
of Beneficial
Ownership(1)
|
| |
Percentage
of Preferred
Stock
Outstanding(3)
|
The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355(4)
|
| |
9,828,774
|
| |
10.0%
|
| |
|
| |
|
BlackRock, Inc.
40 East 52nd
Street New York, NY 10022(5)
|
| |
9,445,810
|
| |
9.6%
|
| |
|
| |
|
Wasatch Financial Advisors
505 Wakara Way, 3rd Floor
Salt Lake City, UT 84108(6)
|
| |
9,295,215
|
| |
9.5%
|
| |
|
| |
|
Kiernan Conway
|
| |
976
|
| |
*
|
| |
|
| |
|
Daniel D. Cronheim(7)
|
| |
182,601
|
| |
*
|
| |
2,550
|
| |
*
|
Catherine B. Elflein(8)
|
| |
17,496
|
| |
*
|
| |
|
| |
|
Brian H. Haimm(9)
|
| |
16,679
|
| |
*
|
| |
|
| |
|
Neal Herstik(10)
|
| |
24,901
|
| |
*
|
| |
2,800
|
| |
*
|
Matthew I. Hirsch(11)
|
| |
80,097
|
| |
*
|
| |
|
| |
|
Eugene W. Landy(12)
|
| |
2,178,295
|
| |
2.2%
|
| |
|
| |
|
Michael P. Landy(13)
|
| |
806,129
|
| |
*
|
| |
|
| |
|
Samuel A. Landy(14)
|
| |
347,455
|
| |
*
|
| |
|
| |
|
Kevin S. Miller(15)
|
| |
152,141
|
| |
*
|
| |
|
| |
|
Richard P. Molke(16)
|
| |
35,714
|
| |
*
|
| |
10,000
|
| |
*
|
Gregory T. Otto
|
| |
5,310
|
| |
*
|
| |
|
| |
|
Sonal Pande
|
| |
227
|
| |
*
|
| |
|
| |
|
Michael D. Prashad(17)
|
| |
47,524
|
| |
*
|
| |
|
| |
|
Scott L. Robinson(18)
|
| |
10,207
|
| |
*
|
| |
|
| |
|
Directors and Executive Officers as a group(20)
|
| |
3,968,758
|
| |
4.0%
|
| |
15,720
|
| |
*
|
*
|
Less than 1%.
|
(1)
|
Except as indicated in the footnotes to this table and pursuant to applicable community property laws, MNR believes that the persons named in the table have sole voting and investment power with respect to MNR common shares listed.
|
(2)
|
Based on the number of MNR common shares outstanding on June 15, 2021, which was 98,302,207 shares.
|
(3)
|
Based on the number of shares of MNR Series C preferred stock outstanding on June 15, 2021, which was 21,985,616 shares.
|
(4)
|
Based on Schedule 13G filed with the SEC on June 10, 2021.
|
(5)
|
Based on Schedule 13G filed with the SEC on February 4, 2021.
|
(6)
|
Based on Schedule 13G filed with the SEC on February 9, 2021.
|
(7)
|
Includes (a) 485shares of unvested MNR restricted stock; (b) 86,269MNR common shares held in a trust for Mr. Cronheim’s two minor family members, to which he has sole dispositive and voting power; and (c) 71,411 MNR common shares pledged in a margin account.
|
(8)
|
Includes 485 shares of unvested MNR restricted stock; and (b) 3,500 MNR common shares owned jointly with Ms. Elflein’s husband.
|
(9)
|
Includes 485shares of unvested MNR restricted stock.
|
(10)
|
Includes (a) 485 shares of unvested MNR restricted stock and (b) 1,600 MNR common shares owned by Mr. Herstik’s wife. As of June 15, 2021, Mr. Herstik also owned 2,400 shares of MNR Series C preferred stock and 400 shares of MNR Series C preferred stock are owned by the Gross, Truss & Herstik Profit Sharing Plan, over which Mr. Herstik has shared voting power and shared dispositive power.
|
(11)
|
Includes (a) 485shares of unvested MNR restricted stock; and (b) 3,441 MNR common shares owned by Mr. Hirsch’s wife.
|
(12)
|
Includes (a) 10,724 shares of unvested MNR restricted stock; (b) 97,914 MNR common shares owned by Mr. Eugene Landy’s wife; (c) 201,427 MNR common shares held in the Landy & Landy Employees’ Profit Sharing Plan of which Mr. Landy is a trustee and has shared voting and dispositive power; (d) 168,294 MNR common shares held in the Landy & Landy Employees’ Pension Plan over which Mr. Landy has shared voting and dispositive power; (e) 13,048 MNR common shares held in Landy Investments Ltd., over which Mr. Landy has shared voting and dispositive power; (f) 194,405 MNR common shares held in the Eugene W. and Gloria Landy Family Foundation, a charitable trust, over which Mr. Landy has shared voting and dispositive power; (g) 43,748 MNR common shares held by Juniper Plaza Associates, over which Mr. Landy has shared voting and dispositive power; (h) 32,866 MNR common shares held by Windsor Industrial Park Associates, over which Mr. Landy has shared voting and dispositive power; (i) 499,451 MNR common shares pledged in a margin account; and (j) 474,017 MNR common shares pledged as security for loans. Includes 455,000 MNR common shares issuable upon the exercise of stock options that are exercisable within 60 days of June 15, 2021. Excludes 65,000 MNR common shares issuable upon the exercise of a stock option not exercisable within 60 days of June 15, 2021.
|
(13)
|
Includes (a) 23,594 shares of unvested MNR restricted stock; (b) 42,587 MNR common shares owned by Mr. Michael Landy’s wife; (c) 190,032 MNR common shares held in custodial accounts for Mr. Landy’s children under the New Jersey Uniform Transfer to Minors Act; (d) 53,000 MNR common shares held by EWL Grandchildren Fund, LLC, over which Mr. Landy has shared voting power and shared dispositive power; (e) 34,228 MNR common shares held in the UMH 401(k) Plan for Mr. Landy’s benefit; and (f) 226,725 MNR common shares pledged in a margin account.
|
(14)
|
Includes (a) 485 shares of unvested MNR restricted stock; (b) 25,484 MNR common shares owned by Mr. Samuel Landy’s wife; (c) 22,379 MNR common shares held by the Samuel Landy Family Limited Partnership, over which Mr. Landy has shared voting power and shared dispositive power; (d) 53,000 MNR common shares held in EWL Grandchildren Fund, LLC, over which Mr. Landy has shared voting power and shared dispositive power; (e) 18,385 MNR common shares pledged in a margin account; (f) 181,454 MNR common shares pledged as security for a loan; and (g) 64,482 MNR common shares held in the UMH 401(k) Plan for Mr. Landy’s benefit. As a co-trustee of the UMH 401(k) Plan, Mr. Landy has shared voting power, but no dispositive power, over the 197,104 MNR common shares held in the UMH 401(k) Plan. He, however, disclaims beneficial ownership of all of the MNR common shares held by the UMH 401(k) Plan, except for the 64,482 MNR common shares held by the UMH 401(k) Plan for his benefit.
|
(15)
|
Includes (a) 485 shares of unvested MNR restricted stock; and (b) 2,665 MNR common shares held in the UMH 401(k) Plan for Mr. Miller’s benefit; and (c) 65,978 MNR common shares issuable upon the exercise of a stock option that is exercisable within 60 days of June 15, 2021.
|
(16)
|
Includes (a) 5,185 MNR common shares held in the UMH 401(k) Plan for Mr. Molke’s benefit; (b) 30,000 MNR common shares issuable upon the exercise of a stock option that is exercisable within 60 days of June 15, 2021 and (c) 10,000 shares of MNR Series C preferred stock pledged in a margin account.
|
(17)
|
Includes (a) 2,034 MNR common shares held in the UMH 401(k) Plan for Mr. Prashad’s benefit and (b) 45,000 MNR common shares issuable upon the exercise of a stock option that is exercisable within 60 days of June 15, 2021.
|
(18)
|
Includes 485 shares of unvested MNR restricted stock.
|
(19)
|
Includes beneficial ownership by all of MNR’s current directors and executive officers.
|
•
|
the Code;
|
•
|
current, temporary and proposed Treasury Regulations promulgated under the Code;
|
•
|
the legislative history of the Code;
|
•
|
administrative interpretations and practices of the IRS; and
|
•
|
court decisions;
|
•
|
banks, insurance companies, and other financial institutions;
|
•
|
tax-exempt organizations or governmental organizations;
|
•
|
S corporations, partnerships or other entities or arrangements treated as pass-through entities for U.S. federal income tax purposes (and investors therein);
|
•
|
persons who hold MNR common shares (or, following the merger, the Combined Company common shares) pursuant to the exercise of any employee stock option or otherwise as compensation;
|
•
|
persons subject to the alternative minimum tax;
|
•
|
regulated investment companies, mutual funds and REITs;
|
•
|
“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax (and investors therein);
|
•
|
brokers or dealers in stock and securities, commodities or currencies;
|
•
|
traders in securities that elect to apply a mark-to-market method of accounting;
|
•
|
U.S. expatriates and former citizens or long-term residents of the United States;
|
•
|
persons holding MNR common shares (or, following the merger, the Combined Company common shares) as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
|
•
|
persons deemed to sell MNR common shares (or, following the merger, the Combined Company common shares) under the constructive sale provisions of the Code;
|
•
|
persons who are required to recognize income or gain with respect to the merger no later than such income or gain is required to be reported on an applicable financial statement;
|
•
|
persons that are not United States holders; or
|
•
|
United States persons whose functional currency is not the U.S. dollar.
|
•
|
an individual who is a citizen or resident of the United States;
|
•
|
a corporation, or entity treated as a corporation, created or organized under the laws of the United States, any state thereof, or the District of Columbia;
|
•
|
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
|
•
|
a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.
|
•
|
MNR will not recognize any gain or loss as a result of the merger.
|
•
|
A U.S. holder of MNR common shares will not recognize any gain or loss upon receipt of the Combined Company common shares in exchange for its MNR common shares in connection with the merger, except with respect to cash received in lieu of any fractional Combined Company common share, as discussed below.
|
•
|
A U.S. holder will have an aggregate tax basis in the Combined Company common shares it receives in the merger equal to the U.S. holder’s aggregate tax basis in its MNR common shares surrendered pursuant to the merger, reduced by the portion of the U.S. holder’s tax basis in its MNR common shares surrendered in the merger that is allocable to any fractional Combined Company common share. If a U.S. holder acquired any of its MNR common shares at different prices and/or at different times, Treasury Regulations provide that the tax basis and holding period of each block of Combined Company common shares received by such U.S. holder in the merger will be determined on a block-for-block basis depending on the basis and holding period of the blocks of MNR common shares exchanged for Combined Company common shares. U.S. holders that acquired different blocks of MNR common shares at different times or at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period among the Combined Company common shares received in the merger.
|
•
|
The holding period of the Combined Company common shares received by a U.S. holder in connection with the merger will include the holding period of the MNR common shares surrendered in connection with the merger.
|
•
|
Cash received by a U.S. holder in lieu of a fractional Combined Company common share in the merger will be treated as if such fractional share had been issued in connection with the merger and then redeemed by the Combined Company for cash, and such U.S. holder generally will recognize capital gain or loss with respect to such cash payment, measured by the difference, if any, between the amount of cash received and the U.S. holder’s tax basis in such fractional share. Such capital gain or loss will be long-term capital gain or loss if, at the effective time of the merger, the U.S. holder’s holding period in respect of such fractional share is greater than one year. Non-corporate U.S. shareholders are generally subject to tax on long-term capital gains at reduced rates under current law. The deductibility of capital losses is subject to limitations.
|
•
|
due incorporation, valid existence, good standing and qualification to conduct business;
|
•
|
corporate power and authority, due authorization and enforceability of the merger agreement;
|
•
|
absence of governmental consents, approvals and filings;
|
•
|
absence of any conflict with or violation of organizational documents or applicable laws, the absence of any violation or breach of, or default or consent requirements under, certain agreements and the absence of any creation or imposition of a lien;
|
•
|
capitalization;
|
•
|
subsidiaries;
|
•
|
SEC documents, internal controls, compliance with the Sarbanes-Oxley Act and the absence of off-balance sheet arrangements;
|
•
|
financial statements;
|
•
|
accuracy of information supplied for the Form S-4 registration statement of which this joint proxy statement/prospectus forms a part;
|
•
|
absence of certain changes since December 31, 2020;
|
•
|
absence of material undisclosed liabilities;
|
•
|
compliance with laws and permits;
|
•
|
litigation;
|
•
|
insurance matters;
|
•
|
real property;
|
•
|
receipt of fairness opinions from J.P. Morgan and CSCA;
|
•
|
tax matters, including qualification of MNR as a REIT;
|
•
|
employee benefit plans and ERISA;
|
•
|
employees and labor matters;
|
•
|
environmental matters;
|
•
|
intellectual property;
|
•
|
material contracts;
|
•
|
investment banker, broker, finder or other similar fees;
|
•
|
inapplicability of takeover statutes; and
|
•
|
absence of material undisclosed related party transactions.
|
•
|
due incorporation, valid existence, good standing and qualification to conduct business;
|
•
|
corporate power and authority, due authorization and enforceability of the merger agreement;
|
•
|
absence of governmental consents, approvals and filings;
|
•
|
absence of any conflict with or violation of organizational documents or applicable laws, the absence of any violation or breach of, or default or consent requirements under, certain agreements and the absence of any creation or imposition of a lien;
|
•
|
capitalization and interim operations of Merger Sub;
|
•
|
SEC documents, internal controls, compliance with the Sarbanes-Oxley Act and the absence of off-balance sheet arrangements;
|
•
|
financial statements;
|
•
|
accuracy of information supplied for the Form S-4 registration statement of which this joint proxy statement/prospectus forms a part;
|
•
|
absence of certain changes since December 31, 2020;
|
•
|
absence of material undisclosed liabilities;
|
•
|
compliance with laws and permits;
|
•
|
litigation;
|
•
|
insurance matters;
|
•
|
real property;
|
•
|
receipt of a fairness opinion from Goldman Sachs;
|
•
|
tax matters, including qualification of EQC as a REIT;
|
•
|
employee benefit plans and ERISA;
|
•
|
employees and labor matters;
|
•
|
environmental matters;
|
•
|
material contracts;
|
•
|
investment banker, broker, finder or other similar fees;
|
•
|
absence of material undisclosed related party transactions;
|
•
|
inapplicability of takeover statutes;
|
•
|
ownership of MNR common shares;
|
•
|
absence of status as an “interested stockholder” under Maryland law;
|
•
|
solvency; and
|
•
|
sufficiency of funds.
|
•
|
changes or fluctuations in the economy or the securities, capital, credit or financial markets generally in the United States;
|
•
|
national or international political conditions or changes therein (including the commencement, continuation or escalation of acts of war, armed hostilities, sabotage or other acts of terrorism);
|
•
|
changes that are the result of factors generally affecting the real estate industry or the geographic areas in which EQC and its subsidiaries or MNR and its subsidiaries, as applicable, operate;
|
•
|
any loss of, or adverse change in, the relationship of EQC or any of its subsidiaries, or MNR or any of its subsidiaries, as applicable, with its lessees, employees, suppliers, financing sources, business partners, regulators or other third parties solely caused by the identity of MNR or EQC, as applicable, the execution of the merger agreement or the announcement, negotiation, existence or performance of the transactions contemplated by the merger agreement;
|
•
|
changes in GAAP, the rules or policies of the Public Company Accounting Oversight Board or any applicable law or interpretation or application of any of the foregoing after the date of the merger agreement;
|
•
|
any failure by EQC or MNR to meet any internal or external projections, forecasts or estimates of revenues, earnings, cash flow, funds from operations or other metrics for any period;
|
•
|
the suspension of trading in securities on the NYSE or a decline in the price, or a change in the trading volume, of the EQC common shares or MNR common shares, as applicable, on the NYSE;
|
•
|
effects resulting from COVID-19, earthquakes, hurricanes, tornados or other weather conditions, natural disasters or force majeure events;
|
•
|
any change or announcement of a potential change in the credit rating of EQC or any of its subsidiaries or any of their securities, or MNR or any of its subsidiaries or any of their securities, as applicable;
|
•
|
compliance by EQC or MNR, as applicable, with the terms of the merger agreement, including the failure of EQC or MNR to take any action as a result of restrictions on the conduct of business in the merger agreement, or any actions taken, or failure to take any action, which the other party has requested in writing; or
|
•
|
any shareholder litigation or threatened shareholder litigation, in each case, arising from allegations of a breach of duty or similar obligations in connection with the merger agreement or the transactions contemplated thereby.
|
•
|
amend or propose or agree to amend, in any material respect, any of its organizational documents or waive the stock ownership limit under the charter of MNR;
|
•
|
declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property) in respect of any of its capital stock, except for (A) the declaration and payment by MNR of regular quarterly cash dividends on its outstanding MNR common shares in an amount not exceeding $0.18 per share and (B) the declaration and payment by MNR of quarterly cash dividends on the outstanding MNR Series C preferred stock in an amount equal to $0.3828125 per share; provided that notwithstanding the restriction on dividends and other distributions in this bullet point, (i) MNR and its subsidiaries will be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for MNR to maintain its status as a REIT under the Code (or applicable state law) and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law), and (ii) in the event EQC declares or pays any cash dividend or distribution on its common shares that is reasonably necessary for EQC to maintain its status as a REIT under the Code (or applicable state law) and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law), MNR will be entitled to declare and pay a dividend to the holders of MNR common shares in an amount per MNR common share equal to the product obtained by multiplying the dividend declared by EQC with respect to each EQC common share by the exchange ratio;
|
•
|
adjust, split, combine or reclassify any of its capital stock or issue or propose or authorize the issuance of any other securities (including options, warrants or any similar security exercisable for, or convertible into, such other security) in lieu of, or in substitution for, shares of its capital stock;
|
•
|
(A) repurchase, redeem or otherwise acquire any shares of the capital stock of MNR or any of its subsidiaries, or any other equity interests or any rights, warrants or options to acquire any such shares or interests, except for the withholding of shares to satisfy withholding tax obligations in respect of MNR restricted stock awards outstanding as of the date of the merger agreement or awarded after the date of the merger agreement in accordance with their terms and MNR’s incentive plans in effect on the date of the merger agreement or (B) acquire or dispose of any securities of any third party that are publicly traded or any rights, warrants or options to acquire any such securities;
|
•
|
issue, sell, grant, pledge, amend, grant any rights in respect of or otherwise encumber any shares of its capital stock or other securities (including any options, warrants or any similar security exercisable for, or convertible into, such capital stock or similar security) or make any changes (by combination, merger, consolidation, reorganization, liquidation or otherwise) in the capital structure of MNR or any of its subsidiaries, except for the issuance of MNR common shares in connection with the exercise of options or the vesting or settlement of other equity or equity-linked awards outstanding as of the date of the merger agreement;
|
•
|
merge or consolidate with any other person or acquire any material assets or make a material investment in (whether through the acquisition of stock, assets or otherwise) any other person;
|
•
|
sell, lease, license, subject to a material lien, except for certain permitted liens, or otherwise dispose of any assets (excluding cash and cash equivalents for payables arising in the ordinary course), or any product lines or businesses of MNR or any of its subsidiaries (including capital stock or other equity interests of any subsidiary of MNR) except for dispositions of immaterial assets (other than real property) that are obsolete, surplus, uneconomical or otherwise no longer useful in the business of MNR and its subsidiaries for a purchase price that, in each case, represents the market value of such asset in all material respects and for amounts not to exceed $25,000 in the aggregate;
|
•
|
make any loans, advances or capital contributions to any other person;
|
•
|
create, incur, guarantee or assume any indebtedness (excluding trade payables arising in the ordinary course), except for indebtedness for borrowed money incurred pursuant to agreements in effect prior to the execution and delivery of the merger agreement;
|
•
|
make or commit to make capital expenditures other than (A) in conjunction with emergency repairs or (B) as required by law, provided, in each case, that MNR provides prompt written notice to EQC;
|
•
|
except as required by contracts in effect prior to the execution and delivery of the merger agreement or MNR’s benefit plans, (A) increase the compensation or other benefits payable or provided to MNR’s directors or employees (provided that, in lieu of paying mid-year bonuses to employees consistent with past practice, MNR will be permitted to pay special transaction bonuses to employees at or prior to the closing of the merger in an aggregate amount not to exceed $2,000,000); (B) enter into any employment, bonus, change of control, severance or retention agreement with any employee of MNR; (C) establish, adopt, or enter into any collective bargaining agreement, plan, trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries; (D) amend any plan, trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except to make changes of an administrative nature that would not result in a material increase in cost to MNR or as is required to comply with Section 409A of the Code; or (E) terminate the employment of any MNR employee, other than for “cause”;
|
•
|
(A) settle or compromise any material claim, audit, arbitration, suit, investigation, complaint or other proceeding or (B) enter into any consent decree, injunction or similar restraint or form of equitable relief in settlement of any material claim or audit that would materially restrict the operations of the business after the effective time of the merger;
|
•
|
(A) modify or amend in any materially adverse respect or terminate any material contract (other than any termination or renewal in accordance with the terms of any existing material contract that occurs automatically without any action other than notice of renewal), (B) enter into any successor agreement to an expiring material contract that changes the terms of the expiring material contract in a way that is materially adverse to MNR or any of its subsidiaries or (C) enter into any new agreement that would have been considered a material contract if it were entered into at or prior to the date of the merger agreement;
|
•
|
except as required by applicable law or changes in GAAP, materially change any of its accounting policies for financial accounting purposes;
|
•
|
enter into any tax protection agreement; make, change or rescind any material election relating to taxes; change a material method of tax accounting; file or amend any material tax return, settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment; enter into any closing agreement related to a material amount of taxes; knowingly surrender any right to claim any material tax refund; give or request any waiver of a statute of limitations with respect to any material tax return, except, in each case, (A) to the extent required by law or (B) to the extent necessary (x) to preserve MNR’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any MNR subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
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terminate, cancel, amend or modify any insurance policies covering MNR or any of its subsidiaries or their respective properties which is not replaced by a comparable amount of insurance coverage;
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enter into any new line of business;
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take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause MNR to fail to qualify as a REIT or any MNR subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
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adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of MNR or any of its subsidiaries;
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incur any expenses in connection with the merger agreement and the transactions contemplated by the merger agreement or pay any expenses incurred in connection with the merger agreement and the
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(A) modify or amend the engagement letters entered into with J.P. Morgan and/or CSCA to increase the compensation payable by MNR thereunder or (B) enter into any new contract with J.P. Morgan or CSCA; or
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authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions.
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amend or propose or agree to amend any of its organizational documents in such a manner that would cause holders of MNR common shares that receive EQC common shares pursuant to the merger to be treated differently than other holders of EQC common shares;
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declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property) in respect of any of its common shares, except for (A) the declaration and payment by EQC of quarterly cash dividends on its outstanding preferred stock in an amount equal to $0.40625 per share and (B) dividends or distributions by any wholly owned EQC subsidiary to EQC or to any other wholly owned EQC subsidiary; provided that notwithstanding the restriction on dividends and other distributions in this bullet point, (i) EQC and its subsidiaries will be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for EQC to maintain its status as a REIT under the Code (or applicable state law) and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law) and (ii) in the event MNR declares or pays any cash dividend or distribution on its common shares (other than regular quarterly cash dividends) that is reasonably necessary for MNR to maintain its status as a REIT under the Code (or applicable state law) and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law), or in the event MNR declares or pays any regular quarterly cash dividend or distribution on its common shares, other than the regular quarterly common dividend of $0.18 per share paid on June 15, 2021 and the regular quarterly common dividend of $0.18 per share declared by the MNR Board on July 1, 2021 and payable on September 15, 2021 (unless the merger is
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adjust, split, combine or reclassify any of its common shares or issue or propose or authorize the issuance of any other securities (including options, warrants or any similar security exercisable for, or convertible into, such other security) in lieu of, or in substitution for, its common shares; provided that, for the avoidance of doubt, the foregoing will not prohibit any conversion of its Series D preferred shares in accordance with its terms;
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repurchase, redeem or otherwise acquire any of its common shares or any of its subsidiaries, or any other equity interests or any rights, warrants or options to acquire any such shares or interests, except for the withholding of shares to satisfy withholding tax obligations in respect of MNR restricted stock awards outstanding as of the date of the merger agreement in accordance with their terms and MNR’s incentive plans in effect on the date of the merger agreement;
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except as required by applicable law or changes in GAAP, materially change any of its accounting policies for financial accounting purposes;
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enter into any tax protection agreement; make, change or rescind any material election relating to taxes; change a material method of tax accounting; file or amend any material tax return, settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment; enter into any closing agreement related to a material amount of taxes; knowingly surrender any right to claim any material tax refund; give or request any waiver of a statute of limitations with respect to any material tax return except, in each case, (A) to the extent required by law or (B) to the extent necessary (x) to preserve EQC’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any EQC subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
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enter into any new line of business;
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take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause EQC to fail to qualify as a REIT or any EQC subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
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adopt a plan of complete or partial liquidation or dissolution with respect to EQC or resolutions providing for or authorizing such a liquidation or dissolution;
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take any action that would reasonably be expected to (A) result in any condition to the merger set forth in the merger agreement not being satisfied in all material respects or (B) prevent, materially delay or materially impede the consummation of the merger or any other transactions contemplated by the merger agreement; or
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authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions.
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“Intervening Event” means a material event, occurrence, development or change in circumstances with respect to MNR and its subsidiaries, taken as a whole, that occurred or arose after the date of the merger agreement, which was unknown to, nor reasonably foreseeable by, the MNR Board (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable by the MNR Board) as of the date of the merger agreement and becomes known to or by the MNR Board prior to the time MNR common shareholder approval of the merger is obtained; provided, however, that none of the following will constitute, or be considered in determining whether there has been, an Intervening Event: (i) the receipt, existence of or terms of a Takeover Proposal or any matter relating thereto or consequence thereof and (ii) changes in the market price or trading volume of MNR common shares or the fact that MNR meets or exceeds internal or published projections, budgets, forecasts or estimates of revenues, earnings or other financial results for any period (provided, however, that the underlying causes of such change or fact will not be excluded by this clause (ii)).
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“Takeover Proposal” means any inquiry, proposal or offer from any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) (other than EQC or any of its subsidiaries) relating to, in a single transaction or series of transactions, (i) any direct or indirect purchase or other acquisition by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) (other than EQC or any of its subsidiaries) of MNR common shares representing more than twenty percent (20%) of the MNR common shares outstanding after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) that, if consummated in accordance with its terms, would result in such person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) beneficially owning more than twenty percent (20%) of MNR common shares outstanding after giving effect to the consummation of such tender or exchange offer; (ii) any direct or indirect purchase or other acquisition by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than
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“Superior Proposal” means any unsolicited bona fide written Takeover Proposal that did not result from a breach, in any material respect, of MNR’s non-solicitation obligations that the MNR Board has determined in its good faith judgment, after consultation with its financial advisors and outside legal counsel, and taking into consideration, among other things, all legal, financial, regulatory, timing and other aspects and risks of the proposal (including required conditions) and the person making the proposal and all of the other terms, conditions and other aspects of such Takeover Proposal and the merger agreement that the MNR Board (or any committee thereof) deems relevant, to be (i) more favorable to MNR’s shareholders from a financial point of view than the transactions contemplated by the merger agreement (including, if applicable, any revisions to the merger agreement made or proposed in writing by EQC in accordance with the provisions described above) and (ii) reasonably likely of being consummated on the terms so proposed; provided, that for purposes of the definition of “Superior Proposal,” the references to “20%” and “80%” in the definition of Takeover Proposal will be deemed to be references to “50%”.
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until the first anniversary of the effective time of the merger, the Surviving Entity will provide, or cause to be provided, continued employment (except in the case of termination for cause) for those individuals who were employees of MNR and its subsidiaries immediately prior to the effective time of the merger, other than Eugene Landy and Michael Landy, and will provide, or cause to be provided,
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the Surviving Entity will (i) waive any applicable pre-existing condition exclusions and waiting periods with respect to participation and coverage requirements in any replacement or successor welfare benefit plan of the Surviving Entity that a continuing employee is eligible to participate in to the extent such exclusions or waiting periods were inapplicable to, or had been satisfied by, such continuing employee under the analogous MNR benefit plan in which such continuing employee participated, (ii) provide each continuing employee with credit for any co-payments and deductibles paid prior to the effective time of the merger (to the same extent such credit was given under the analogous MNR benefit plan) in satisfying any applicable deductible or out-of-pocket requirements, and (iii) recognize service with MNR and any of its subsidiaries for purposes of eligibility to participate and vesting and level of benefits to the same extent such service was recognized by MNR or any of its subsidiaries under the analogous MNR benefit plan in which such continuing employee participated immediately prior to the effective time of the merger;
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except as otherwise agreed to in writing between EQC and an employee of MNR, EQC will cause the Surviving Entity to honor the existing MNR employment agreements and all obligations thereunder; and
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any continuing employee who is not a party to an existing employment agreement with MNR or one of its subsidiaries and whose employment is terminated by EQC without cause between the twelve month anniversary and the thirteen month anniversary of the effective time of the merger will be entitled to severance pay and benefits no less favorable than the severance pay and benefits such continuing employee would have been entitled to pursuant to MNR’s existing severance plan and otherwise on the same terms and conditions as set forth in such existing severance plan.
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each of MNR and EQC taking all steps reasonably necessary to cause the transactions contemplated by the merger agreement and any other dispositions of equity securities of MNR or acquisitions of equity securities of EQC in connection with the transactions contemplated by the merger agreement by each individual who is a director or executive officer of MNR or EQC to be exempt under Rule 16b-3 promulgated under the Exchange Act;
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EQC using its reasonable best efforts to cause, prior to the effective time of the merger, the EQC common shares to be issued pursuant to the merger agreement to be approved for listing, upon official notice of issuance, on the NYSE;
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each of the parties cooperating with each other in taking, or causing to be taken, all actions necessary to delist the MNR common shares from the NYSE and terminate its registration under the Exchange Act after the effective time of the merger;
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MNR delivering to EQC on or prior to the date of the MNR special meeting a letter identifying all persons who are “affiliates” of MNR for purposes of Rule 145 under the Securities Act and using all reasonable efforts to cause each person identified as an “affiliate” in such letter to deliver a written agreement, in form and substance reasonably acceptable to EQC, in connection with restrictions on affiliates under Rule 145; and
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each of MNR and EQC (i) notifying the other party of any shareholder litigation relating to the merger agreement, the merger or the other transactions contemplated by the merger agreement, (ii) keeping the other party reasonably informed with respect to the status thereof, (iii) giving the other party the opportunity to reasonably participate in (but not control) the defense of any such litigation, and considering in good faith the other party’s advice with respect to such litigation, and (iv) not settling or agreeing to settle any such litigation without the other party’s prior written consent (which consent will not be unreasonably withheld).
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EQC shareholders approve the issuance of EQC common shares in connection with the merger by the affirmative vote of at least a majority of the votes cast on the proposal;
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MNR shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of at least two-thirds of the MNR common shares outstanding on the record date;
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the EQC common shares to be issued in connection with the merger being authorized for listing on the NYSE, subject only to official notice of issuance;
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the Form S-4 registration statement becoming effective under the Securities Act and not being the subject of any stop order or proceeding seeking a stop order;
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the absence of any law or order preventing or prohibiting the merger; and
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the absence of any pending, threatened, or outstanding investigation or challenge by any governmental entity with respect to the transactions contemplated by the merger agreement.
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the accuracy as of the date of the merger agreement and the closing date (or, in the case of representations and warranties that by their terms were made specifically as of the date of the merger
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the accuracy of all other representations and warranties made in the merger agreement by MNR that by their terms were made specifically as of the date of the merger agreement or another specified date as of such date, and the accuracy of all other representations and warranties made in the merger agreement by MNR as of the date of the merger agreement and as of the closing date (in each case, disregarding any materiality or material adverse effect qualifications contained in such representations and warranties), except for any such inaccuracies that would not, individually or in the aggregate, reasonably be expected to have a “material adverse effect” (as defined above) on MNR and would not reasonably be expected to materially impair, materially delay or prevent MNR from consummating the merger before November 24, 2021;
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the performance or compliance by MNR in all material respects with all agreements and covenants required to be performed by it under the merger agreement at or prior to the closing of the merger;
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the absence of a material adverse effect with respect to MNR since May 4, 2021;
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receipt by EQC of an officer’s certificate signed by an executive officer of MNR certifying that the closing conditions described in the four preceding bullet points have been satisfied;
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receipt by EQC of a written opinion of Venable LLP or other nationally recognized tax counsel to MNR, dated as of the closing date, to the effect that, for MNR’s taxable year ended September 30, 2008 and through its taxable year ended September 30, 2020, MNR has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its actual method of operation through the date of such opinion has enabled, and its proposed method of operation will continue to enable, MNR to meet the requirements for qualification and taxation as a REIT through the effective time of the merger; and
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receipt by EQC of a written opinion of Fried, Frank, Harris, Shriver & Jacobson LLP or other nationally recognized tax counsel to EQC, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
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the accuracy as of the date of the merger agreement and the closing date (or, in the case of representations and warranties that by their terms were made specifically as of the date of the merger agreement or another specified date, the accuracy as of such date) of certain representations and warranties made in the merger agreement by EQC and Merger Sub regarding certain matters, including its organization and subsidiaries, corporate authority, capitalization, absence of certain changes and brokers and finders’ fees (except in the case of representations and warranties regarding capitalization, for de minimis inaccuracies);
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the accuracy of all other representations and warranties made in the merger agreement by EQC and Merger Sub that by their terms were made specifically as of the date of the merger agreement or another specified date as of such date, and the accuracy of all other representations and warranties made in the merger agreement by EQC and Merger Sub as of the date of the merger agreement and as of the closing date (in each case, disregarding any materiality or material adverse effect qualifications contained in such representations and warranties), except for any such inaccuracies that would not, individually or in the aggregate, reasonably be expected to have a “material adverse effect” (as defined above) on EQC and would not reasonably be expected to materially impair, materially delay or prevent EQC from consummating the merger before November 24, 2021;
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the performance or compliance by each of EQC and Merger Sub in all material respects with all agreements and covenants required to be performed by it under the merger agreement at or prior to the closing of the merger;
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the absence of a material adverse effect with respect to EQC since May 4, 2021;
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receipt by MNR of an officer’s certificate signed by an executive officer of EQC certifying that the closing conditions described in the four preceding bullet points have been satisfied;
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receipt by MNR of a written opinion of Fried, Frank, Harris, Shriver & Jacobson LLP or other nationally recognized tax counsel to EQC, dated as of the closing date, to the effect that, commencing with EQC’s taxable year that ended on December 31, 2016, EQC has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its current organization and its current and proposed method of operation will enable EQC to continue to meet the requirements for qualification and taxation as a REIT under the Code; and
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receipt by MNR of a written opinion of Stroock & Stroock & Lavan LLP or other nationally recognized tax counsel to MNR, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
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the merger is not consummated on or before November 24, 2021;
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any governmental entity of competent jurisdiction issues an order or takes any other action permanently restraining, enjoining or otherwise prohibiting the merger and such order or other action becomes final and non-appealable (provided that the right to terminate the merger agreement on this basis is not available to a party whose failure to act in good faith or to use its reasonable best efforts to consummate the transactions contemplated by the merger agreement is a principal cause of the application or imposition of such order or other action);
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the requisite holders of MNR common shares do not vote to approve the merger and the other transactions contemplated by the merger agreement at the MNR special meeting or at any adjournment or postponement thereof; or
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the requisite holders of EQC common shares do not vote to approve the issuance of EQC common shares in the merger at the EQC special meeting or at any adjournment or postponement thereof.
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MNR breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure to perform (i) is reasonably incapable of being cured by MNR by November 24, 2021 or (ii) if reasonably capable of being cured, has not been cured by MNR within 45 days following written notice to MNR from EQC or Merger Sub of such breach, and, in each case, would result in a failure of any closing condition to the merger (provided that EQC will not have the right to terminate the merger agreement pursuant to this provision if EQC is then in material breach of any representation, warranty, covenant or agreement in the merger agreement); or
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prior to the MNR common shareholders having voted upon approval of the merger and the other transactions contemplated by the merger agreement at the MNR special meeting, (i) the MNR Board resolves to or effects a Recommendation Withdrawal, (ii) a tender or exchange offer subject to Regulation 14D under the Exchange Act that constitutes a Takeover Proposal is commenced by a person who is not EQC or an affiliate of EQC and the MNR Board does not publicly announce, within ten business days after the commencement of such tender or exchange offer, that MNR recommends rejection of such tender or exchange offer or (iii) MNR materially breaches its obligations or agreements with respect to the MNR special meeting or non-solicitation.
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EQC or Merger Sub breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure to perform (A) is reasonably incapable of being cured by EQC or Merger Sub, as the case may be, by November 24, 2021 or (B) if reasonably capable of being cured, has not been cured by EQC or Merger Sub, as the case may be, within 45 days following written notice to EQC or Merger Sub, as the case may be, from MNR of such breach, and, in each case, would result in a failure of any closing condition to the merger (provided that MNR will not have the right to terminate the merger agreement pursuant to this provision if MNR is then in material breach of any representation, warranty, covenant or agreement in the merger agreement); or
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prior to obtaining the requisite approval of the MNR common shareholders for the merger and the other transactions contemplated by the merger agreement at the MNR special meeting, in response to a written Takeover Proposal, the MNR Board determines in good faith (after consultation with its financial advisors and outside legal counsel) that such Takeover Proposal constitutes a Superior Proposal.
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by either MNR or EQC because (i) the merger is not consummated on or before November 24, 2021 or (ii) the requisite approval of MNR common shareholders for the merger and the other transactions contemplated by the merger agreement is not obtained, or by EQC because MNR breached or failed to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, and in any such case (A) a Takeover Proposal was publicly proposed or announced by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) after the date of the merger agreement and not withdrawn or abandoned as of such termination or as of the time of the MNR special meeting, and (B) within twelve months of such termination MNR consummates a Takeover Proposal or enters into a definitive agreement for a Takeover Proposal that is subsequently consummated (within such twelve-month period or within six months thereafter) with the person or “group” that publicly proposed or announced the Takeover Proposal in sub-clause (A); provided that each reference to “20%” or “80%” in the definition of “Takeover Proposal” will be deemed to be a reference to “50%”;
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by MNR, prior to obtaining the requisite approval of MNR common shareholders for the merger and the other transactions contemplated by the merger agreement, in response to a written Takeover Proposal that the MNR Board determines in good faith (after consultation with its financial advisors and outside legal counsel) constitutes a Superior Proposal; or
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by EQC, prior to the common shareholders of MNR having voted upon approval of the merger and the other transactions contemplated by the merger agreement at the MNR special meeting, in response to (i) the MNR Board resolving to or effecting a Recommendation Withdrawal, (ii) a tender or exchange offer subject to Regulation 14D under the Exchange Act that constitutes a Takeover Proposal being commenced by a person who is not EQC or an affiliate of EQC, if the MNR Board does not publicly announce, within ten business days after the commencement of such tender or exchange offer, that MNR recommends rejection of such tender or exchange offer or (iii) MNR materially breaching its obligations or agreements with respect to the MNR special meeting or the non-solicitation of Takeover Proposals.
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no person, other than an excepted holder (as defined in the EQC Declaration of Trust), may own directly, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8%, in value or number of shares, whichever is more restrictive, of EQC’s issued and outstanding common or preferred shares;
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no excepted holder (as defined in the EQC Declaration of Trust), may own directly, or be deemed to own by virtue of the attribution provisions of the Code, shares in excess of an excepted holder limit established by the EQC Board;
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no person shall beneficially or constructively own EQC common shares that would result in EQC being “closely held” under Section 856(h) of the Code;
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no person shall beneficially own shares that would result in EQC otherwise failing to qualify as a REIT (including but not limited to ownership that would result in the EQC owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by EQC (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant would cause EQC to fail to satisfy any of the gross income requirements of Section 856(c) of the Code); and
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no person shall transfer EQC common shares if such transfer would result in EQC common shares being owned by fewer than 100 persons.
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senior to all classes or series of common shares and to any other class or series of the stock expressly designated as ranking junior to the EQC Series D preferred shares;
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on parity with any class or series of EQC’s shares expressly designated as ranking on parity with the EQC Series D preferred shares; and
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junior to any other class or series of stock expressly designated as ranking senior to the EQC Series D preferred shares.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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Corporate Governance
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EQC is a Maryland real estate investment trust that has elected to be taxed as a REIT for U.S. federal income tax purposes.
The rights of EQC shareholders are governed by the Maryland REIT Law, the EQC Declaration of Trust, and the EQC Bylaws.
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MNR is a Maryland corporation that has elected to be taxed as a REIT for U.S. federal income tax purposes.
The rights of MNR shareholders are governed by the MGCL, the MNR charter and the MNR Bylaws.
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Authorized Capital Stock
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EQC is authorized to issue up to 350,000,000 common shares of beneficial interest, par value $0.01 per share, and 50,000,000 preferred shares of beneficial interest, par value $0.01 per share, 15,180,000 of which have been classified and designated as EQC Series D preferred shares.
At June 15, 2021, 121,921,850 EQC common shares were issued and outstanding.
At June 15, 2021, 4,915,196 EQC Series D preferred shares were issued and outstanding. The EQC Board is authorized to classify any unissued
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MNR is authorized to issue up to 300,000,000 shares of common stock, $0.01 par value per share, 26,600,000 shares of Series C preferred stock, $0.01 par value per share, and 200,000,000 shares of excess stock, $0.01 par value per share.
At June 15, 2021, 98,302,207 MNR common shares, 21,985,616 shares of MNR Series C preferred stock and no shares of MNR excess stock were issued and outstanding.
Preferred Stock. The MNR Board is authorized to issue shares of any class of stock, and to classify or
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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preferred shares and to reclassify any previously classified but unissued preferred shares of any series from time to time in one or more series by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for such class or series.
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reclassify any unissued shares of stock by setting or changing the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of such shares of stock.
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Voting Rights
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Common Shares. Each outstanding EQC common share entitles the holder to one vote on all matters submitted to a vote of common shareholders, including the election of trustees and, except as provided with respect to any other class or series of stock, the holders of such common shares will possess the exclusive voting power.
Preferred Shares. Holders of EQC Series D preferred shares generally have no voting rights. However, if EQC is in arrears on dividends on any series of preferred stock for six or more quarterly periods, whether or not consecutive, holders of EQC Series D preferred shares (voting separately as a class with the holders of all other classes or series of preferred shares upon which like voting rights have been conferred and are exercisable) will be entitled to vote at the next annual meeting and each subsequent annual meeting of shareholders for the election of two additional trustees to serve on the EQC Board until all unpaid dividends with respect to any series of preferred stock have been paid or declared and a sum sufficient for the payment thereof set aside for payment.
In addition, EQC may not make certain material and adverse changes to the terms of the EQC Series D
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Common Shares. Each outstanding MNR common share entitles the holder to one vote on all matters submitted to a vote of shareholders.
Preferred Stock. Holders of MNR Series C preferred stock generally have no voting rights. However, if MNR is in arrears on dividends on any outstanding shares of Series C preferred stock for six or more quarterly periods, whether or not consecutive, holders of such series (voting together as a class with the holders of all other classes or series of parity preferred stock upon which like voting rights have been conferred and are exercisable) will have the exclusive power to vote for the election of two additional directors, until all dividends accumulated on the outstanding shares of Series C preferred stock for past periods and the then-current period have been fully paid. In addition, MNR may not (i) amend, alter or repeal any provision of the MNR charter so as to materially and adversely affect any right, preference privilege or voting power of the Series C preferred stock; or (ii) authorize, create, issue, or increase the authorized or issued amount of any class or series of capital stock having a preference as to dividends or other distributions, whether upon liquidation, dissolution or winding up, that is senior to the
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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preferred shares without the affirmative vote of the holders of at least two-thirds of the outstanding EQC Series D preferred shares (voting separately as a class).
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Series C preferred stock, reclassify any authorized stock into such stock or create, authorize or issue any obligation or security convertible or exchangeable into, or evidencing the right to purchase any stock, that is senior to the Series C preferred stock, without the approval of the holders of at least two-thirds of the outstanding shares of Series C preferred stock and any class or series ranking on parity with the Series C preferred stock with which the holders of Series C preferred stock are entitled to vote together as a single class on such matter (voting together as a single class).
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Cumulative Voting
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Holders of EQC common shares do not have the right to cumulate their votes with respect to the election of trustees, which means that in an uncontested election the holders of a majority of the votes cast can elect all of the trustees then standing for election.
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MNR shareholders do not have the right to cumulate their votes.
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Size of the Board of Trustees / Directors
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The EQC Declaration of Trust provides that the number of trustees shall never be less than three nor more than 13, with the number of trustees established by the EQC Board, as provided in the EQC Declaration of Trust. The current size of the EQC Board is eight.
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The MNR charter and the MNR Bylaws provide for the minimum number of directors pursuant to the MGCL, with a maximum of 15 directors. The MNR Bylaws require MNR to have at least three independent directors, as defined in the MNR charter. The number of directors shall be established by a vote of the majority of the MNR Board, as provided in the MNR charter and the MNR Bylaws. The current size of the MNR Board is 13.
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Classified Board and Term of Trustees / Directors
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The EQC Board is not classified. The EQC trustees hold office until the next succeeding annual meeting of shareholders and until their successors qualify and are duly elected.
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The MNR Board (except for the directors elected by the holders of any one or more series of preferred stock as described above) is divided into three classes, Class I, Class II, and Class III. The term of MNR directors of each class is for three years and until their successors qualify and are duly elected. The
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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unclassified directors elected by the holders of shares of MNR Series C preferred stock will hold office until the next succeeding annual meeting of shareholders and until their successors qualify and are duly elected (provided that any such director’s term of office shall terminate upon the payment by MNR of dividends accumulated on the outstanding shares of MNR Series C preferred stock for all past dividend periods and the then-current dividend period).
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Election of Trustees / Directors
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A majority of all the votes cast at a meeting at which a quorum is present is sufficient to elect a trustee in an uncontested election. In a contested election (which is an election in which the number of nominees for election is greater than the number to be elected at the meeting), trustees will be elected by a plurality of the votes cast.
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The plurality of all votes cast at a meeting at which a quorum is present is sufficient to elect a director.
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Removal of Trustees / Directors
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Subject to the rights of holders of any series of preferred shares, a trustee may be removed at any time with or without cause by the vote or consent of holders of shares representing two-thirds of the total votes entitled to be cast generally in the election of trustees.
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Subject to the rights of holders of preferred stock to elect or remove one or more directors, a director may be removed from office at any time, but only for cause and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
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Filling Vacancies of Trustees / Directors
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Any vacancy, including a vacancy created by an increase in the number of trustees, may be filled by a vote of a majority of the remaining trustees, even if the remaining trustees do not constitute a quorum, or by a majority of votes cast by shareholders at a special meeting.
Any trustee on the EQC Board who is elected to fill a vacancy shall serve for the remainder of the full term in which the vacancy occurred and until a successor is elected and qualifies.
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Except as may be provided by the MNR Board in setting the terms of any class or series of preferred stock, any vacancies on the MNR Board may be filled by the affirmative vote of a majority of the remaining directors in office, whether or not sufficient to constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term in which the vacancy occurred.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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Amendment of Declaration of Trust / Charter
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The EQC Declaration of Trust provides that EQC generally cannot amend its Declaration of Trust unless declared advisable by the EQC Board and approved by the affirmative vote of holders of common shares representing a majority of the total number of votes authorized to be cast on the matter (notwithstanding a higher vote otherwise required by Maryland REIT Law).
However, two-thirds of the EQC trustees may, after written notice to shareholders, amend the Declaration of Trust without the vote or consent of shareholders if in good faith they deem it necessary to conform the Declaration of Trust to the requirements of the REIT provisions of the Code, but the Trustees shall not be liable for failing to do so.
In addition, the EQC Board may at any time, and from time to time, without shareholder approval, amend the EQC Declaration to increase or decrease the aggregate number of shares or the number of shares of any class that the Trust has authority to issue.
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The MNR charter provides that MNR reserves the right to amend the charter upon approval of the MNR Board and the affirmative vote of the holders of not less than two-thirds of all votes entitled to be cast on the matter.
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Bylaw Amendments
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The EQC Bylaws may be altered, amended, or repealed by the vote of a majority of the entire EQC Board or by the affirmative vote of a majority of all the shares outstanding and entitled to be cast on the matter.
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The MNR Board has the exclusive power to make, repeal, alter, amend, and rescind the MNR Bylaws by vote of a majority of the entire MNR Board.
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Mergers, Consolidations, Conversion, Dissolution, Statutory Share Exchanges or Sales of Substantially all Assets
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Mergers, consolidations, conversions, dissolutions, statutory share exchanges, or sales of substantially all assets shall be valid only if declared advisable by the EQC Board and approved by the affirmative vote of holders of EQC common shares representing a majority of all the shares then outstanding and entitled to vote on the matter; except for a
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In addition to approval by the MNR Board, pursuant to the MGCL, a proposed merger, consolidation, or sale of substantially all the assets of MNR requires approval by the affirmative vote of holders of MNR common shares representing at least two-thirds of all the votes entitled to be cast on the proposal.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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merger that may be approved pursuant to the provisions of the Maryland REIT Law by a majority of the EQC Board without a vote of the shareholders.
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Ownership Limitations
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With certain limited exceptions, no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8%, in value or number of shares, whichever is more restrictive, of EQC’s issued and outstanding common or preferred shares.
The EQC Board may waive the 9.8% ownership limit for common and preferred shares for a shareholder that is not an individual if such shareholder provides information and makes representations to the EQC Board that are satisfactory to the EQC Board, in its sole discretion, to establish that such person’s ownership in excess of the 9.8% ownership limit for common and preferred shares, would not jeopardize EQC’s qualification as a REIT.
In the event of a purported transfer or other event that would, if effective, result in the ownership of shares in violation of the ownership limitation, that number of shares that would be owned by the transferee in excess of the ownership limit are automatically transferred to a trust for the benefit of a charitable beneficiary or void ab initio, in which case the intended transferee shall acquire no rights in the excess shares. The purported transferee has no right to receive dividends or other distributions on or vote such shares. The EQC Board or a committee thereof may take such action as it deems advisable to refuse to give effect to or to prevent such transfer or other event, including, without limitation, purchasing such shares for cash.
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With certain limited exceptions, no person may beneficially or constructively own more than 9.8% of the outstanding MNR common shares.
In the event of a transfer or other event that would, if effective, result in the ownership of shares in violation of the ownership limitation, such transfer shall be void ab initio and the transferee shall acquire no rights in such excess shares.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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Annual Meetings of Shareholders
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An annual meeting of the shareholders for the election of trustees and the transaction of any other business shall be held each year, after the delivery of the annual report, at a convenient place or location and on proper notice, on a date and at the time, as set by the EQC Board.
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The annual meeting of MNR shareholders shall be held at a date and time set by the MNR Board.
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Special Meetings of Shareholders
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A special meeting of EQC shareholders may be called by the chairman of the EQC Board, the chief executive officer or president, a majority of the EQC Board or upon the written request of shareholders entitled to cast not less than 10% of all the votes entitled to be cast at any such special meeting of shareholders.
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A special meeting of MNR shareholders may be called by the chairman of the MNR Board, the president, a majority of the MNR Board by a vote at a meeting or in writing with or without a meeting and shall be called by the secretary upon the written request of shareholders entitled to cast at least a majority of all the votes entitled to be cast at a meeting.
A request for a special meeting shall state the purpose of such meeting and the matters proposed to be acted on at such meeting.
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Advance Notice Provisions for Shareholder Nominations and Shareholder Business Proposals
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The EQC Bylaws provide that nominations for election to the EQC Board and the proposal of business to be considered by the shareholders at the annual meeting may be made only:
• pursuant to the notice of an
annual meeting;
• by the EQC Board; or
• by a shareholder who was a shareholder of record both at the time of the provision of notice and at the time of the meeting, who is entitled to vote at the meeting and who has complied with the advance notice procedures set forth in
the EQC Bylaws.
In general, notice of shareholder nominations or business proposals for an annual meeting must be delivered |
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The MNR Bylaws provide that nominations for election to the MNR Board may be made only:
• by or at the direction of the
MNR Board; or
• by a MNR shareholder who (i) is a shareholder of record on the date of giving the notice, on the record date for determining shareholders entitled to vote at the annual meeting, and on the date of the annual meeting and (ii) complies with the notice procedures set forth in the
MNR Bylaws.
The MNR Bylaws provide that the proposal of business to be considered by the shareholders may be made
only:
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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not less than 120 days nor more than 150 days prior to the first anniversary of the date of the preceding year’s proxy statement, unless the annual meeting is advanced or delayed more than 30 days from the anniversary date of the preceding year’s annual meeting, in which case notice must be delivered not later than the 120th day prior to the annual meeting, or, if later, the tenth day following the day on which the public announcement of the date of the meeting is first made.
Notice of shareholders nominations for a special meeting must be delivered not earlier than the 120th day prior to the special meeting, and not later than the close of business on the later of the 90th day prior to the meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.
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• pursuant to the notice of a meeting given by or at the
direction of the MNR Board;
• by or at the direction of the
MNR Board; or
• by a MNR shareholder who (i) is a shareholder of record on the date of giving the notice, on the record date for determining shareholders entitled to vote at the annual meeting, and on the date of the annual meeting and (ii) complies with the notice procedures set forth in the
MNR Bylaws.
In general, notice of shareholder nominations or business for an annual meeting must be delivered to the secretary not less than 90 days nor more than 120 days prior to the first anniversary of mailing of the notice for the preceding year’s annual meeting, unless the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, in which case notice must be delivered not earlier than the 120th day prior to the date of mailing of the notice for such annual meeting and not later than the close of business on the later of the 90th day prior to the date of mailing of the notice for such annual meeting or the 10th day following the day on which the public announcement of the date of the meeting is first made. Notice of shareholder nominations for a special meeting must be delivered not earlier than the 120th day prior to the special meeting, and not later than the later of the close of business on 90th day prior to the special meeting or the 10th day following the day on which the public announcement is first made of the date of the special meeting. |
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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Notice of Shareholder Meetings
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The EQC Bylaws provide that not less than 10 nor more than 90 days before each meeting of shareholders, EQC shall give notice to each shareholder entitled to vote at such meeting, and to each shareholder not entitled to vote but who is entitled to notice of the meeting, written or electronic notice stating the time and place of the meeting, and in the case of a special meeting or as otherwise may be required by Maryland law, the purpose for which the meeting is called. The notice shall be given by mail, by presenting it to such shareholder personally, by leaving it at the shareholder’s residence or usual place of business or by any other means permitted by Maryland law.
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The MNR Bylaws provide that not less than 10 nor more than 90 days before each meeting of shareholders, MNR shall give written notice to each shareholder entitled to vote at such meeting, and to each shareholder not entitled to vote who is entitled to notice of the meeting, stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by statute, the purpose for which the meeting is called. The notice shall be given by mail, by presenting it to such shareholder personally, by leaving it at the shareholder’s residence or usual place of business or by electronic mail or any other electronic means.
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State Anti-Takeover Statutes
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Maryland law provides that holders of “control shares” of a Maryland REIT acquired in a “control share acquisition” have no voting rights unless approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, or by officers or trustees who are also employees of EQC are excluded from the shares entitled to vote on the matter.
“Control shares” are issued and outstanding voting shares that, if aggregated with all other shares previously acquired by the acquiring person, or in respect of which the acquiring person is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiring person to exercise or direct the exercise of the voting power in electing trustees within one of the following ranges of voting power: (i) one-tenth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) a majority or more of all voting power.
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Maryland law provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights unless approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, or by officers or directors who are also employees of MNR are excluded from the shares entitled to vote on the matter.
“Control shares” are issued and outstanding voting shares that, if aggregated with all other shares previously acquired by the acquiring person, or in respect of which the acquiring person is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiring person to exercise or direct the exercise of the voting power in electing directors within one of the following ranges of voting power: (i) one-tenth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) a majority or more of all voting power.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of outstanding control shares, subject to certain exceptions. A control share acquisition does not include shares acquired in a merger, consolidation, or share exchange if the corporation or entity is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws.
EQC’s Bylaws contain a provision exempting any and all acquisitions of its common shares from the control shares provisions of Maryland law described above. However, the EQC Board may opt to make these provisions applicable to EQC at any time by amending or repealing this provision in the future, and may do so on a retroactive basis.
Maryland law prohibits certain “business combinations” between EQC and an interested shareholder or an affiliate of an interested shareholder for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Maryland law defines an interested shareholder as: (i) any person who beneficially owns 10% or more of the voting power of EQC’s shares; or(ii) an affiliate or associate of EQC who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of EQC’s shares.
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Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of outstanding control shares, subject to certain exceptions. A control share acquisition does not include shares acquired in a merger, consolidation, or share exchange if the corporation or entity is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws.
As permitted under Maryland law, the MNR Bylaws provide that MNR has elected not to be governed by the provisions of the control share acquisition statute. However, the MNR Board may opt to make these provisions applicable to MNR at any time by amending or repealing this provision in the future, and may do so on a retroactive basis.
Maryland law prohibits certain “business combinations” between MNR and an interested shareholder or an affiliate of an interested shareholder for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Maryland law defines an interested shareholder as: (i) any person who beneficially owns 10% or more of the voting power of MNR’s shares; or (ii) an affiliate or associate of MNR who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of MNR’s shares.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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After the five-year prohibition, any business combination between EQC and an interested shareholder generally must be recommended by the EQC Board and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of EQC’s outstanding shares, and (ii) two-thirds of the votes entitled to be cast by holders of EQC shares other than shares held by the interested stockholder or its affiliates or associates.
The super-majority vote requirements do not apply, however, to business combinations that are approved or exempted by the EQC Board prior to the time that the interested shareholder becomes an interested shareholder or the business combination satisfies certain minimum price, form of consideration and procedural requirements.
The EQC Board has approved a resolution that exempts EQC from the provisions of the Maryland business combination statute described above but may opt to make these provisions applicable to EQC in the future.
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After the five-year prohibition, any business combination between MNR and an interested shareholder generally must be recommended by the MNR Board and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of MNR’s outstanding shares, and (ii) two-thirds of the votes entitled to be cast by holders of MNR shares other than shares held by the interested stockholder or its affiliates or associates.
The super-majority vote requirements do not apply, however, to business combinations that are approved or exempted by the MNR Board prior to the time that the interested shareholder becomes an interested shareholder or the business combination satisfies certain minimum price, form of consideration and procedural requirements.
As permitted under Maryland law, the MNR charter provides that the MNR Board has elected to rely on the provisions of Subtitle 6 of Title 3 of the MGCL relating to business combinations with interested shareholders or affiliates of interested shareholders, except that certain specified transactions are exempted from such provisions.
Under certain provisions of Maryland law relating to unsolicited takeovers, a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors may elect to be subject, by provision in its charter or bylaws or by resolutions of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions: (i) a classified board, (ii) a two-thirds vote requirement for
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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removing a director, (iii) a requirement that the number of directors be fixed only by vote of the directors, (iv) that any and all vacancies on the board of directors may be filled by the remaining directors, even if the remaining directors do not constitute a quorum, and for the remainder of the full term of the class of directors in which the vacancy occurred, and (v) a majority requirement for the calling of a shareholder-requested special meeting of shareholders.
Through provisions in the MNR charter and MNR Bylaws unrelated to the statute, MNR already has a two-thirds vote requirement for the removal of directors, has a majority requirement for shareholder-requested special meetings, and vests in the board of directors the sole power to fix the number of directorships, provided that the number is not less than the minimum number required by Maryland law and not greater than 15. The MNR charter provides that, except as may be provided by the MNR Board in setting the terms of any series of preferred stock, any vacancy on the board of directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred.
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Shareholder Rights Plan
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EQC does not have a shareholder rights plan in effect.
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MNR does not have a shareholder rights plan in effect.
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Liability and Indemnification of Trustees / Directors and Officers
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The EQC Declaration of Trust contains provisions limiting, to the maximum extent permitted by Maryland law in effect from time to time, the liability of trustees or officers of EQC to EQC or its
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The MNR charter contains provisions that eliminate the liability of MNR’s directors and officers to MNR and its shareholders for money damages to the maximum extent that Maryland law in effect from time to time
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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shareholders for money damages. Under Maryland law, trustees or officers of EQC will not have any liability to EQC or its shareholders for money damages other than liability resulting from: (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established in a judgment or other final adjudication as being material to the cause of action.
The EQC Declaration of Trust permits EQC, and the EQC Bylaws obligate EQC, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify, and without requiring a preliminary determination of the ultimate entitlement to indemnification, to pay or reimburse or advance reasonable expenses in advance of final disposition of a proceeding to (i) any present or former trustee or officer who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (ii) any individual who, while a trustee or officer of EQC and at EQC’s request, serves or has served as a trustee, officer or partner of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.
EQC may, with the approval of the EQC Board, indemnify and advance expenses to any person who served a predecessor of EQC in any of the capacities described above and to any employee or agent of EQC or a predecessor of EQC. The EQC Bylaws specify that any indemnification or payment or
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permits. Under Maryland law, however, these provisions do not eliminate or limit the personal liability of a director or officer (a) to the extent that it is proved that the director or officer actually received an improper benefit or profit in money, property or services or (b) if a judgment or other final adjudication is entered in a proceeding based on a finding that the director's or officer's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in such proceeding.
The MNR charter and MNR Bylaws obligate MNR, to the maximum extent that Maryland law in effect from time to time permits, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, to pay or reimburse expenses in advance of final disposition of a proceeding to (i) any individual who is a present or former director or officer of MNR, or at MNR’s request any other entity, and who was, is made, or threatened to be made, a party to any threatened or actual suit, investigation or other proceeding, including administrative actions, by reason of their actions as director or officer. MNR may, with the approval of the MNR Board, provide such indemnification to other employees and agents, whether serving MNR or at MNR’s request any other entity.
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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reimbursement of the expenses as described above will be made in accordance with the procedures provided by the MGCL for directors of Maryland corporations.
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Distributions
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The EQC Bylaws provide that the EQC Board may authorize dividends and other distributions upon EQC common shares, subject to provisions of law and the EQC Declaration of Trust. Before payment of any dividends or other distributions, the EQC Board may set aside out of the assets of EQC available for dividends or other distributions such sum or sums as the EQC Board may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of EQC or for such other purposes as the EQC Board shall determine. The EQC Board may modify or abolish any such reserve.
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The MNR Bylaws provide that the MNR Board may authorize dividends and other distributions upon MNR’s shares, subject to provisions of law and the MNR charter.
The MNR charter provides that before payment of any dividends to the holders of common shares, MNR must satisfy any preferential dividends or requirements with respect to redemption rights and preferences on any then outstanding preferred stock.
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Arbitration
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Under the EQC Bylaws, actions brought by a shareholder against EQC or any trustee, officer, manager, agent or employee of EQC, including derivative and class actions, shall, on the demand of any party to such dispute, be resolved through binding arbitration in accordance with the procedures set forth in the EQC Bylaws.
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The MNR Bylaws provide that unless MNR consents in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of MNR, (b) any action asserting a claim of breach of any duty owed by any director or officer or other employee of MNR to MNR or to the shareholders of MNR, (c) any action asserting a claim against MNR or any director or officer or other employee of MNR arising pursuant to any provision of the MGCL or the MNR charter or Bylaws, or (d) any action asserting a claim against MNR
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Rights of EQC Shareholders
(which will be the rights of
shareholders of the Combined
Company following the
merger)
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Rights of MNR Shareholders
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or any director or officer or other employee of MNR that is governed by the internal affairs doctrine.
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Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
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Current Reports on Form 8-K filed on March 1, 2021 and May 5, 2021 (other than documents or portions of those documents not deemed to be filed).
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Proxy Statement for EQC’s 2021 Annual Meeting of Shareholders, on Schedule 14A filed with the SEC on April 27, 2021.
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The description of EQC’s common shares included in the Registration Statement on Form 8-A filed with the SEC on November 8, 1986 under Section 12(b) of the Exchange Act and including any additional amendment or report filed for the purpose of updating such description.
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•
|
Annual Report on Form 10-K for the fiscal year ended September 30, 2020.
|
•
|
Quarterly Reports on Form 10-Q for the quarters ended December 31, 2020 and March 31, 2021.
|
•
|
Current Reports on Form 8-K filed on January 14, 2021, May 5, 2021, May 6, 2021, July 13, 2021, July 19, 2021 and July 22, 2021 (other than documents or portions of those documents not deemed to be filed).
|
•
|
Proxy Statement for MNR’s 2020 Annual Meeting of Shareholders, on Schedule 14A filed with the SEC on March 31, 2020.
|
If you are an EQC shareholder:
D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Call Toll-Free: (877) 783-5524
Call Collect: (212) 269-5550
Email: eqc@dfking.com
|
| |
If you are a MNR shareholder:
Okapi Partners LLC
1212 Avenue of the Americas, 24th Floor
New York, NY 10036
Call Toll-Free: (877) 796-5274
Email: MNR@okapi.com
|
Number of EQC common shares to be issued to Monmouth common shareholders at March 31, 2021(1)
|
| |
66.1
|
Multiplied by price of EQC common shares on July 15, 2021(2)
|
| |
$27.15
|
Estimated fair value of EQC common shares to be issued
|
| |
$1,795
|
Repayment of Monmouth Series C preferred stock
|
| |
549
|
Estimated transaction costs(3)
|
| |
77
|
Estimated aggregate consideration
|
| |
$2,421
|
(1)
|
There were approximately 98.6 million fully-diluted Monmouth common shares issued and outstanding at March 31, 2021. The Monmouth shareholders will receive 0.67 of a newly issued EQC common share for each Monmouth common share that they owned on the closing date.
|
(2)
|
The estimated purchase price is based on the closing price of EQC common shares on July 15, 2021, the latest practicable date prior to the date of this proxy statement/prospectus. The final purchase price will be based on the price of EQC common shares as of the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a change in the EQC common share price of 10% would result in an approximate $200 million change in the estimated aggregate consideration.
|
(3)
|
For purposes of the pro forma information, estimated transaction costs for the Merger were included in the estimated aggregate consideration. These estimated transaction costs are estimated to be approximately $77 million and include costs associated with investment banker advisory fees, legal fees, and other costs. These costs will be capitalized by EQC given the Merger is anticipated to be accounted for as an asset acquisition. Consideration for unvested Monmouth common shares and options under Monmouth’s equity incentive plan that become fully vested at closing are included in the estimated fair value of EQC common shares to be issued.
|
|
| |
Historical (A)
|
| |
|
| |
|
| |||||
|
| |
Equity
Commonwealth
|
| |
Monmouth
|
| |
Monmouth
Pro Forma
Adjustments
|
| |
|
| |
Pro Forma
Combined
|
ASSETS
|
| |
|
| |
|
| |
|
| |
|
| |
|
Real estate properties:
|
| |
|
| |
|
| |
|
| |
|
| |
|
Land
|
| |
$44,060
|
| |
$266,794
|
| |
$239,492
|
| |
(B)
|
| |
$550,346
|
Buildings and improvements
|
| |
361,107
|
| |
1,945,880
|
| |
686,809
|
| |
(B)
|
| |
2,993,796
|
|
| |
405,167
|
| |
2,212,674
|
| |
926,301
|
| |
|
| |
3,544,142
|
Accumulated depreciation
|
| |
(147,034)
|
| |
(321,047)
|
| |
321,047
|
| |
(C)
|
| |
(147,034)
|
|
| |
258,133
|
| |
1,891,627
|
| |
1,247,348
|
| |
|
| |
3,397,108
|
Cash and cash equivalents
|
| |
2,971,052
|
| |
19,383
|
| |
(710,829)
|
| |
(D)
|
| |
2,279,606
|
Marketable securities
|
| |
—
|
| |
131,654
|
| |
—
|
| |
|
| |
131,654
|
Rents receivable
|
| |
14,629
|
| |
17,118
|
| |
(14,383)
|
| |
(E)
|
| |
17,364
|
Lease intangible assets, net
|
| |
—
|
| |
20,563
|
| |
215,704
|
| |
(F)
|
| |
236,267
|
Other assets, net
|
| |
16,862
|
| |
28,071
|
| |
(6,785)
|
| |
(G)
|
| |
38,148
|
Total assets
|
| |
$3,260,676
|
| |
$2,108,416
|
| |
$731,055
|
| |
|
| |
$6,100,147
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
LIABILITIES AND EQUITY
|
| |
|
| |
|
| |
|
| |
|
| |
|
Mortgage notes payable, net
|
| |
$—
|
| |
$866,224
|
| |
$47,160
|
| |
(H)
|
| |
$913,384
|
Loans payable
|
| |
—
|
| |
75,000
|
| |
(75,000)
|
| |
(D)
|
| |
—
|
Accounts payable, accrued expenses and other
|
| |
21,007
|
| |
16,372
|
| |
(3,268)
|
| |
(I)
|
| |
34,111
|
Lease intangible liabilities, net
|
| |
—
|
| |
—
|
| |
113,660
|
| |
(J)
|
| |
113,660
|
Rent collected in advance
|
| |
2,979
|
| |
11,915
|
| |
—
|
| |
|
| |
14,894
|
Distributions payable
|
| |
5,072
|
| |
2,805
|
| |
—
|
| |
|
| |
7,877
|
Total liabilities
|
| |
29,058
|
| |
972,316
|
| |
82,552
|
| |
|
| |
1,083,926
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Shareholders’ equity:
|
| |
|
| |
|
| |
|
| |
|
| |
|
Series D preferred shares
|
| |
119,263
|
| |
—
|
| |
—
|
| |
|
| |
119,263
|
Series C preferred shares
|
| |
—
|
| |
549,640
|
| |
(549,640)
|
| |
(D)
|
| |
—
|
Common shares
|
| |
1,219
|
| |
983
|
| |
(322)
|
| |
(K)
|
| |
1,880
|
Additional paid in capital
|
| |
4,295,226
|
| |
588,049
|
| |
1,206,261
|
| |
(K)
|
| |
6,089,536
|
Cumulative net income
|
| |
3,804,930
|
| |
—
|
| |
(10,416)
|
| |
(K)
|
| |
3,794,514
|
Accumulated other comprehensive loss
|
| |
—
|
| |
(2,572)
|
| |
2,572
|
| |
(K)
|
| |
—
|
Cumulative common distributions
|
| |
(4,283,753)
|
| |
—
|
| |
—
|
| |
|
| |
(4,283,753)
|
Cumulative preferred distributions
|
| |
(711,709)
|
| |
—
|
| |
—
|
| |
|
| |
(711,709)
|
Total shareholders’ equity
|
| |
3,225,176
|
| |
1,136,100
|
| |
648,455
|
| |
|
| |
5,009,731
|
Noncontrolling interest
|
| |
6,442
|
| |
—
|
| |
48
|
| |
(K)
|
| |
6,490
|
Total equity
|
| |
3,231,618
|
| |
1,136,100
|
| |
648,503
|
| |
|
| |
5,016,221
|
Total liabilities and equity
|
| |
$3,260,676
|
| |
$2,108,416
|
| |
$731,055
|
| |
|
| |
$6,100,147
|
|
| |
Historical (A)
|
| |
|
| |
|
| |
|
| |
|
|||
|
| |
Equity
Commonwealth
|
| |
Monmouth
|
| |
Monmouth
Pro Forma
Adjustments
|
| |
|
| |
Pro Forma
Combined
|
| |
|
Revenues:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||
Rental revenue
|
| |
$14,169
|
| |
$39,246
|
| |
$1,601
|
| |
(L)
|
| |
$55,016
|
| |
|
Other revenue
|
| |
682
|
| |
7,119
|
| |
—
|
| |
|
| |
7,801
|
| |
|
Total revenues
|
| |
14,851
|
| |
46,365
|
| |
1,601
|
| |
|
| |
62,817
|
| |
|
Expenses:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Operating expenses
|
| |
6,621
|
| |
7,643
|
| |
—
|
| |
(M)
|
| |
14,264
|
| |
|
Depreciation and amortization
|
| |
4,351
|
| |
13,943
|
| |
13,043
|
| |
(N)
|
| |
31,337
|
| |
|
General and administrative
|
| |
15,729
|
| |
4,084
|
| |
—
|
| |
(M)
|
| |
19,813
|
| |
|
Total expenses
|
| |
26,701
|
| |
25,670
|
| |
13,043
|
| |
|
| |
65,414
|
| |
|
Interest and other income, net
|
| |
1,843
|
| |
3,835
|
| |
—
|
| |
|
| |
5,678
|
| |
|
Interest expense, including amortization of financing costs
|
| |
—
|
| |
(9,387)
|
| |
2,339
|
| |
(O)
|
| |
(7,048)
|
| |
|
Unrealized holding gains
|
| |
—
|
| |
19,186
|
| |
—
|
| |
|
| |
19,186
|
| |
|
(Loss) income before income taxes
|
| |
(10,007)
|
| |
34,329
|
| |
(9,103)
|
| |
|
| |
15,219
|
| |
|
Income tax expense
|
| |
(31)
|
| |
—
|
| |
—
|
| |
|
| |
(31)
|
| |
|
Net (loss) income
|
| |
(10,038)
|
| |
34,329
|
| |
(9,103)
|
| |
|
| |
15,188
|
| |
|
Net loss (income) attributable to noncontrolling interest
|
| |
20
|
| |
—
|
| |
(40)
|
| |
(P)
|
| |
(20)
|
| |
|
Net (loss) income attributable to Equity Commonwealth
|
| |
(10,018)
|
| |
34,329
|
| |
(9,143)
|
| |
|
| |
15,168
|
| |
|
Preferred distributions
|
| |
(1,997)
|
| |
(8,416)
|
| |
8,416
|
| |
(Q)
|
| |
(1,997)
|
| |
|
Net (loss) income attributable to Equity Commonwealth common shareholders
|
| |
$(12,015)
|
| |
$25,913
|
| |
$(727)
|
| |
|
| |
$13,171
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Weighted average common shares outstanding — basic
|
| |
122,002
|
| |
98,298
|
| |
|
| |
|
| |
188,065
|
| |
(S)
|
Weighted average common shares outstanding — diluted
|
| |
122,002
|
| |
98,496
|
| |
|
| |
|
| |
188,989
|
| |
(S)
|
Earnings per common share attributable to Equity Commonwealth common shareholders:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Basic
|
| |
$(0.10)
|
| |
$0.26
|
| |
|
| |
|
| |
$0.07
|
| |
|
Diluted
|
| |
$(0.10)
|
| |
$0.26
|
| |
|
| |
|
| |
$0.07
|
| |
|
|
| |
Historical (A)
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|||
|
| |
Equity
Commonwealth
|
| |
Monmouth
|
| |
Monmouth
Pro Forma
Adjustments
|
| |
|
| |
Tower 333
Pro Forma
Adjustments
|
| |
|
| |
Pro Forma
Combined
|
| |
|
Revenues:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Rental revenue
|
| |
$62,134
|
| |
$141,583
|
| |
$8,141
|
| |
(L)
|
| |
$(92)
|
| |
(R)
|
| |
$211,766
|
| |
|
Other revenue
|
| |
4,144
|
| |
26,234
|
| |
—
|
| |
|
| |
(55)
|
| |
(R)
|
| |
30,323
|
| |
|
Total revenues
|
| |
66,278
|
| |
167,817
|
| |
8,141
|
| |
|
| |
(147)
|
| |
|
| |
242,089
|
| |
|
Expenses:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Operating expenses
|
| |
28,858
|
| |
27,081
|
| |
—
|
| |
(M)
|
| |
(996)
|
| |
(R)
|
| |
54,943
|
| |
|
Depreciation and amortization
|
| |
19,329
|
| |
49,850
|
| |
58,095
|
| |
(N)
|
| |
(401)
|
| |
(R)
|
| |
126,873
|
| |
|
General and administrative
|
| |
33,233
|
| |
9,718
|
| |
10,416
|
| |
(M)
|
| |
—
|
| |
|
| |
53,367
|
| |
|
Total expenses
|
| |
81,420
|
| |
86,649
|
| |
68,511
|
| |
|
| |
(1,397)
|
| |
|
| |
235,183
|
| |
|
Interest and other income, net
|
| |
21,228
|
| |
10,445
|
| |
—
|
| |
|
| |
—
|
| |
|
| |
31,673
|
| |
|
Interest expense, including amortization of financing costs
|
| |
(620)
|
| |
(36,376)
|
| |
9,653
|
| |
(O)
|
| |
—
|
| |
|
| |
(27,343)
|
| |
|
Gain on early extinguishment of debt
|
| |
131
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
| |
131
|
| |
|
Gain on sale of properties
|
| |
446,744
|
| |
—
|
| |
—
|
| |
|
| |
(194,662)
|
| |
(R)
|
| |
252,082
|
| |
|
Unrealized holding losses
|
| |
—
|
| |
(77,380)
|
| |
—
|
| |
|
| |
—
|
| |
|
| |
(77,380)
|
| |
|
Income (loss) before income taxes
|
| |
452,341
|
| |
(22,143)
|
| |
(50,717)
|
| |
|
| |
(193,412)
|
| |
|
| |
186,069
|
| |
|
Income tax expense
|
| |
(248)
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
| |
(248)
|
| |
|
Net income (loss)
|
| |
452,093
|
| |
(22,143)
|
| |
(50,717)
|
| |
|
| |
(193,412)
|
| |
|
| |
185,821
|
| |
|
Net (income) loss attributable to noncontrolling interest
|
| |
(799)
|
| |
—
|
| |
230
|
| |
(P)
|
| |
351
|
| |
(P)
|
| |
(218)
|
| |
|
Net income (loss) attributable to Equity Commonwealth
|
| |
451,294
|
| |
(22,143)
|
| |
(50,487)
|
| |
|
| |
(193,061)
|
| |
|
| |
185,603
|
| |
|
Preferred distributions
|
| |
(7,988)
|
| |
(26,474)
|
| |
26,474
|
| |
(Q)
|
| |
—
|
| |
|
| |
(7,988)
|
| |
|
Net income (loss) attributable to Equity Commonwealth common shareholders
|
| |
$443,306
|
| |
$(48,617)
|
| |
$(24,013)
|
| |
|
| |
$(193,061)
|
| |
|
| |
$177,615
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Weighted average common shares outstanding — basic
|
| |
121,786
|
| |
98,082
|
| |
|
| |
|
| |
|
| |
|
| |
187,849
|
| |
(S)
|
Weighted average common shares outstanding — diluted
|
| |
126,606
|
| |
98,164
|
| |
|
| |
|
| |
|
| |
|
| |
189,432
|
| |
(S)
|
Earnings per common share attributable to Equity Commonwealth common shareholders:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Basic
|
| |
$3.64
|
| |
$(0.50)
|
| |
|
| |
|
| |
|
| |
|
| |
$0.95
|
| |
|
Diluted
|
| |
$3.56
|
| |
$(0.50)
|
| |
|
| |
|
| |
|
| |
|
| |
$0.94
|
| |
|
Investments in real estate properties, net
|
| |
$3,138,975
|
Cash and cash equivalents
|
| |
19,383
|
Marketable securities
|
| |
131,654
|
Rents receivable
|
| |
2,735
|
Lease intangible assets, net
|
| |
236,267
|
Other assets, net
|
| |
21,286
|
Mortgage notes payable, net
|
| |
(913,384)
|
Loans payable
|
| |
(75,000)
|
Accounts payable, accrued expenses and other
|
| |
(13,104)
|
Lease intangible liabilities, net
|
| |
(113,660)
|
Rent collected in advance
|
| |
(11,915)
|
Distributions payable
|
| |
(2,805)
|
Total estimated purchase price, including transaction costs
|
| |
$2,420,432
|
(A)
|
In order to conform to the current EQC presentation, we condensed and reclassified certain amounts presented in the historical financial statements of EQC and Monmouth.
|
(B)
|
Monmouth’s real estate assets have been adjusted based on the Preliminary Purchase Price Allocation at March 31, 2021 described above.
|
(C)
|
Monmouth’s historical accumulated depreciation balance is eliminated.
|
(D)
|
Monmouth’s Series C preferred stock is repaid, loans payable are repaid and transaction costs are paid.
|
(E)
|
Monmouth’s historical straight-line rent receivable balance is eliminated.
|
(F)
|
Adjustments to Monmouth’s historical balance of lease intangible assets, net are as follows (in thousands):
|
Elimination of previously acquired lease intangible assets
|
| |
$(20,563)
|
Recognition of value of acquired lease intangible assets
|
| |
236,267
|
Total
|
| |
$215,704
|
(G)
|
Adjustments to Monmouth’s historical balance of other assets are as follows (in thousands):
|
Elimination of capitalized lease costs
|
| |
$(5,600)
|
Elimination of deferred financing costs related to the line of credit
|
| |
(1,185)
|
Total
|
| |
$(6,785)
|
(H)
|
Monmouth’s mortgage notes payable balances have been adjusted to their estimated fair value at March 31, 2021. Fair value was estimated based on contractual future cash flows discounted using borrowing spreads and market interest rates that would have been available to us for the issuance of debt with similar terms and remaining maturities.
|
(I)
|
Monmouth’s historical straight-line rent liability and interest rate swap liability balances are eliminated.
|
(J)
|
The fair value of lease intangible liabilities, net includes a liability for acquired leases with below market leases based on our estimate of current market rents in each of the applicable markets.
|
(K)
|
Adjustments represent the elimination of historical Monmouth balances, the issuance of EQC common shares in exchange for Monmouth common shares in the Merger and the recognition of transaction expenses related to compensation arrangements. The adjustment for the noncontrolling interest at March 31, 2021 is based on the noncontrolling interest ownership percentage in the fair value adjustments described above.
|
(L)
|
Adjustments to rental revenue are as follows (in thousands):
|
|
| |
Three Months
Ended March 31, 2021
|
| |
Year Ended
December 31, 2020
|
Elimination of straight-line rent
|
| |
$(1,049)
|
| |
$(2,144)
|
Elimination of amortization of lease intangible assets
|
| |
25
|
| |
103
|
Recognition of straight-line rent
|
| |
1,107
|
| |
4,109
|
Recognition of amortization of lease intangible assets and liabilities
|
| |
1,518
|
| |
6,073
|
Total
|
| |
$1,601
|
| |
$8,141
|
(M)
|
General and administrative expenses have been adjusted to recognize transaction expenses related to compensation arrangements.
|
(N)
|
Adjustments to depreciation and amortization expense are as follows (in thousands):
|
|
| |
Three Months
Ended March 31, 2021
|
| |
Year Ended
December 31, 2020
|
Elimination of depreciation and amortization expense
|
| |
$(13,943)
|
| |
$(49,850)
|
Recognition of depreciation and amortization expense
|
| |
26,986
|
| |
107,945
|
Total
|
| |
$13,043
|
| |
$58,095
|
(O)
|
We adjusted Monmouth’s interest expense based on the fair value of debt. The adjustment to interest expense includes the removal of Monmouth’s historical interest expense, including amortization of deferred financing costs, and calculation of interest expense based on the estimated fair value of acquired mortgage notes payable. The weighted average interest rate associated with the debt at fair value was 2.9% at March 31, 2021 (see note H).
|
(P)
|
For the three months ended March 31, 2021 and year ended December 31, 2020, an adjustment was made to reflect the unitholders’ ownership percentage of 0.13% and 0.12%, respectively, in the pro forma adjustments described.
|
(Q)
|
An adjustment was made to remove Monmouth’s historical preferred dividends because the Series C preferred stock will be paid off in connection with the transaction.
|
(R)
|
An adjustment was made to remove the historical combined revenues and expenses of Tower 333 for the year ended December 31, 2020 as if the disposition had occurred on January 1, 2020.
|
(S)
|
The unaudited pro forma adjustments to shares outstanding used in the calculation of basic earnings per share and diluted earnings per share attributable to common shareholders, after giving effect to the Exchange Ratio for the Merger, were as follows (in thousands):
|
|
| |
Three Months
Ended March 31, 2021
|
| |
Year Ended
December 31, 2020
|
Equity Commonwealth weighted average common shares outstanding - basic
|
| |
122,002
|
| |
121,786
|
Shares issued to Monmouth shareholders - pro forma basis(1)
|
| |
66,063
|
| |
66,063
|
Weighted average common shares outstanding - Basic
|
| |
188,065
|
| |
187,849
|
|
| |
|
| |
|
Equity Commonwealth weighted average common shares outstanding - diluted
|
| |
122,002
|
| |
126,606
|
Series D preferred stock
|
| |
—
|
| |
(3,237)
|
Securities no longer anti-dilutive
|
| |
924
|
| |
—
|
Shares issued to Monmouth shareholders - pro forma basis(1)
|
| |
66,063
|
| |
66,063
|
Weighted average common shares outstanding - Diluted
|
| |
188,989
|
| |
189,432
|
(1)
|
The pro forma weighted average shares outstanding assumes the issuance of shares of EQC common shares in connection with the Merger throughout all periods presented.
|
|
| |
|
| |
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|
| |
EQUITY COMMONWEALTH
|
|||
|
| |
|
| |
|
|
| |
By:
|
| |
/s/ David Helfand
|
|
| |
|
| |
Name: David Helfand
|
|
| |
|
| |
Title: President and Chief Executive Officer
|
|
| |
RS18 LLC
|
|||
|
| |
By Equity Commonwealth, its sole and managing member
|
|||
|
| |
|
| |
|
|
| |
By:
|
| |
/s/ David Helfand
|
|
| |
|
| |
Name: David Helfand
|
|
| |
|
| |
Title: President and Chief Executive Officer
|
|
| |
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
|
|||
|
| |
|
| |
|
|
| |
By:
|
| |
/s/ Michael P. Landy
|
|
| |
|
| |
Name: Michael P. Landy
|
|
| |
|
| |
Title: President and Chief Executive Officer
|
/s/ Goldman Sachs & Co. LLC
|
| |
|
(GOLDMAN SACHS & CO. LLC)
|
| |
|
1.
|
We understand the following: Pursuant to the terms of the Merger Agreement, the Company will be merged with and into Merger Sub (the “Merger”), and Merger Sub will continue as the surviving entity. Pursuant to the Merger, (i) each share of common stock, par value $0.01 per share, of the Company (such shares, collectively, the “Company Common Stock”, and each, a “Company Common Share”) issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount of Parent Common Stock equal to the product of one Company Common Share multiplied by a ratio of 0.67 (the “Common Exchange Ratio”) resulting in the “Merger Consideration” (ii) each share of 6.125% Series C Cumulative Redeemable Preferred Stock of the Company (such shares, collectively, the “Company Preferred Stock”, and each, a “Company Preferred Share”) issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount equal to $25.00 in cash plus all accumulated and unpaid accrued dividends to, but not including, the Closing Date (the “Preferred Stock Consideration”), (iii) each stock option issued pursuant to an Incentive Plan (each, an “Option”), whether vested or unvested, shall be canceled and the holder thereof shall then become entitled to receive the Merger Consideration in respect of each Net Option Share covered by such Option, without interest, and (iv) each unvested restricted stock award issued pursuant to an Incentive Plan (each, a “Restricted Stock Award”), shall be canceled and the holder thereof shall then become entitled to receive the Merger Consideration in respect of each Net RS Share covered by such Restricted Stock Award, without interest. The terms and conditions of the Merger are more fully set forth in the Merger Documents (as defined below). All dollar amounts described herein are in U.S. dollars.
|
(i)
|
CSCA reviewed the (i) audited financial information for the twelve-month periods ended September 30, 2018, 2019, and 2020, respectively, (ii) draft financial information for the three-month and six-month periods ended March 31, 2021, respectively, as provided on April 29, 2021, (iii) unaudited financial information for the three-month and six-month periods ended March 31, 2020, respectively, and (iv) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization, all of the foregoing as prepared and provided by Company management;
|
(ii)
|
CSCA reviewed the (i) audited financial information for the twelve-month periods ended December 31, 2018, 2019, and 2020, respectively, (ii) draft financial information for the three-month period ended March 31, 2021 as provided on April 27, 2021, (iii) unaudited financial information for the three-month periods ended March 31, 2020, and (iv) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization, all of the foregoing as prepared and provided by Parent management;
|
(iii)
|
CSCA reviewed certain publicly available audited and unaudited financial statements and other publicly available business, financial and other information of the Company including but not limited to the Annual Report filed on Form 10-K for the fiscal year ended September 30, 2020 and related supplementary financial information thereto, the Quarterly Report on Form 10-Q and related supplementary information for each of the fiscal quarters ended December 31, 2020, June 30, 2020 and March 31, 2020;
|
(iv)
|
CSCA reviewed certain publicly available audited and unaudited financial statements and other publicly available business, financial and other information of Parent including but not limited to the Annual Report filed on Form 10-K for the fiscal year ended December 31, 2020 and related supplementary financial information thereto, the Quarterly Report on Form 10-Q and related supplementary information for each of the fiscal quarters ended September 30, 2020, June 30, 2020 and March 31, 2020;
|
(v)
|
CSCA reviewed other non-public financial and operating information of the Company including detailed 5-year financial projections prepared by management, information relating to its existing leases, existing debt and related prepayment penalties, historical capital expenditures and related projections, historical re-leasing history and related projections, pending property acquisitions (as to which there can be no assurance of such acquisitions closing) and related leases and financing, among others;
|
(vi)
|
CSCA reviewed other non-public financial and operating information relating to Parent’s commercial real estate assets, including but not limited to rent rolls and 10-year property level projections for its office portfolio, among others;
|
(vii)
|
CSCA reviewed drafts of the Merger Agreement, the most recent draft dated May 3, 2021, and the Disclosure Schedules thereto, the most recent draft dated May 4, 2021 (collectively, the “Merger Documents”);
|
(viii)
|
CSCA compared certain publicly available financial information of the Company with similar publicly available information of other comparable publicly traded industrial and net lease REITs, as CSCA deemed relevant to its analyses;
|
(ix)
|
CSCA compared certain publicly available and non-publicly available financial information of the Parent with publicly available information of other comparable publicly traded office REITs, as CSCA deemed relevant to its analyses;
|
(x)
|
CSCA reviewed the terms, to the extent publicly available, of certain comparable transactions, and compared such terms to the terms of the Merger, as CSCA deemed relevant to its analysis;
|
(xi)
|
CSCA reviewed the stock price history of each of the Company and Parent and compared such prices to the terms of the Merger, as CSCA deemed relevant to its analysis.
|
(xii)
|
CSCA performed various financial analyses as CSCA deemed appropriate, using generally accepted analytical valuation methodologies; and
|
(xiii)
|
CSCA performed such other analyses, inquiries and investigations and consideration of such other factors as CSCA deemed appropriate for the purposes of this Opinion, including its knowledge of the REIT, industrial and office real estate sectors, as well as its experience in connection with similar transactions and securities valuation generally.
|
Item 20.
|
Indemnification of Directors and Officers
|
•
|
the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;
|
•
|
the director or officer actually received an improper personal benefit in money, property or services; or
|
•
|
in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
|
•
|
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and
|
•
|
a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct.
|
•
|
any present or former trustee or officer who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity; or
|
•
|
any individual who, while a trustee or officer of EQC and at EQC’s request, serves or has served as a trustee, officer or partner of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.
|
Item 21.
|
Exhibits and Financial Statement Schedules
|
Exhibit No.
|
| |
Description
|
| |
Agreement and Plan of Merger, dated as of May 4, 2021, by and among Equity Commonwealth, Monmouth Real Estate Investment Corporation and EQC Maple Industrial LLC (f/k/a RS18 LLC) (attached as Annex A to the joint proxy statement/prospectus that is part of this registration statement)
|
|
|
| |
|
| |
Articles of Amendment and Restatement of Declaration of Trust of Equity Commonwealth, dated July 1, 1994, as amended to date (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed August 1, 2014)
|
|
|
| |
|
| |
Articles Supplementary, dated October 10, 2006. (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed October 11, 2006.)
|
|
|
| |
|
| |
Articles Supplementary, dated May 31, 2011. (Incorporated by reference Equity Commonwealth’s Current Report on Form 8-K filed May 31, 2011.)
|
|
|
| |
|
| |
Articles Supplementary, dated March 14, 2018. (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed March 15, 2018.)
|
|
|
| |
|
| |
Fourth Amended and Restated Bylaws of Equity Commonwealth, adopted April 2, 2020. (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed April 3, 2020.)
|
|
|
| |
|
| |
Form of Common Share Certificate. (Incorporated by reference to Equity Commonwealth’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)
|
|
|
| |
|
| |
Form of 6 1/2% Series D Cumulative Convertible Preferred Share Certificate. (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K for the year ended December 31, 2012.)
|
|
|
| |
|
| |
Description of the Equity Commonwealth’s Securities (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K for the year ended December 31, 2020.)
|
|
|
| |
|
| |
Opinion of Ballard Spahr LLP regarding the legality of the securities being registered
|
|
|
| |
|
| |
Opinion of Fried, Frank, Harris, Shriver & Jacobson LLP regarding tax matters
|
|
|
| |
|
| |
Opinion of Stroock & Stroock & Lavan LLP regarding tax matters
|
|
|
| |
|
| |
Articles of Amendment and Restatement of Declaration of Trust of EQC Operating Trust, dated November 10, 2016. (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed November 14, 2016.)
|
|
|
| |
|
| |
Master Sub-Management Agreement, dated as of June 13, 2014, between Equity Commonwealth Management LLC, a wholly owned subsidiary of Equity Commonwealth, and CBRE, Inc. (+) (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed June 17, 2014.)
|
|
|
| |
|
| |
Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed June 18, 2015.)
|
|
|
| |
|
Exhibit No.
|
| |
Description
|
| |
Amendment No. 1 to the Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 18, 2016.)
|
|
|
| |
|
| |
Amendment No. 2 to the Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Registration Statement on Form S-8 filed July 16, 2019.)
|
|
|
| |
|
| |
Form of Restricted Stock Agreement for Employees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Restricted Stock Unit Agreement for Employees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Time-Based LTIP Unit Agreement for Employees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Performance-Based LTIP Unit Agreement for Employees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Restricted Stock Agreement for Chairman of the Board under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Restricted Stock Unit Agreement for Chairman of the Board under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Time-Based LTIP Unit Agreement for Chairman of the Board under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Performance-Based LTIP Unit Agreement for Chairman of the Board under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Annual Report on Form 10-K filed February 15, 2018.)
|
|
|
| |
|
| |
Form of Restricted Stock Agreement for Trustees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed June 15, 2016.)
|
|
|
| |
|
| |
Form of Time-Based LTIP Unit Agreement for Trustees under Equity Commonwealth 2015 Omnibus Incentive Plan. (+) (Incorporated by reference to Equity Commonwealth’s Current Report on Form 8-K filed June 21, 2017.)
|
|
|
| |
|
| |
Summary of Trustee Compensation. (+) (Equity Commonwealth’s Annual Report on Form 10-K for the year ended December 31, 2020)
|
|
|
| |
|
| |
Change in Control Agreement, dated as of April 24, 2019, by and between Equity Commonwealth, Equity Commonwealth Management LLC and David Helfand. (+) (†) (Incorporated by reference to Equity Commonwealth’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.)
|
Exhibit No.
|
| |
Description
|
| |
Consent of Ernst &Young LLP
|
|
|
| |
|
| |
Consent of PKF O’Connor Davies, LLP
|
|
|
| |
|
| |
Consent of Goldman Sachs & Co. LLC
|
|
|
| |
|
| |
Consent of J.P. Morgan Securities LLC
|
|
|
| |
|
| |
Consent of CSCA Capital Advisors, LLC
|
|
|
| |
|
| |
Proxy Card of Equity Commonwealth
|
|
|
| |
|
| |
Proxy Card of Monmouth Real Estate Investment Corporation
|
|
|
| |
|
| |
Consent of Michael P. Landy to be named as a trustee
|
|
|
| |
|
| |
Consent of Sonal Pande to be named as a trustee
|
*
|
Previously filed.
|
(+)
|
Management contract or compensatory plan or arrangement.
|
Item 22.
|
Undertakings
|
1.
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
i.
|
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
ii.
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
|
iii.
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
2.
|
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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3.
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To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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4.
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That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is
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5.
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That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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i.
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Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424
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ii.
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Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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iii.
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The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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iv.
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Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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6.
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The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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7.
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That, prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
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8.
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That every prospectus: (i) that is filed pursuant to the immediately preceding paragraph, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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9.
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To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
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10.
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To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective.
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11.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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EQUITY COMMONWEALTH
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By:
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/s/ David Helfand
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David Helfand
President, Chief Executive Officer and Trustee
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/s/ David Helfand
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President, Chief Executive Officer and
Trustee (Principal Executive Officer)
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July 22, 2021
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David Helfand
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/s/ William H. Griffiths
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Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
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July 22, 2021
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William H. Griffiths
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/s/ Jeffrey D. Brown
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Chief Accounting Officer
(Principal Accounting Officer)
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July 22, 2021
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Jeffrey D. Brown
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/s/ Sam Zell
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Chairman of the Board of Trustees
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July 22, 2021
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Sam Zell
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/s/ Ellen-Blair Chube
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Trustee
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July 22, 2021
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Ellen-Blair Chube
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/s/ Martin L. Edelman
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Trustee
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July 22, 2021
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Martin L. Edelman
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/s/ Peter Linneman
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Trustee
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July 22, 2021
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Peter Linneman
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/s/ Mary Jane Robertson
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Trustee
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July 22, 2021
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Mary Jane Robertson
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/s/ Gerald A. Spector
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Trustee
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July 22, 2021
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Gerald A. Spector
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/s/ James A. Star
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Trustee
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July 22, 2021
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James A. Star
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Re:
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Equity Commonwealth, a Maryland real estate investment trust (the “Company”) — Issuance of up to 66,435,984 (the “Shares”) common shares of beneficial interest, par
value $0.01 per share (the “Common Shares”), of the Company pursuant to a Registration Statement on Form S-4, as amended (File No. 333-257626) (the “Registration Statement”)
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(i) |
the declaration of trust of the Company (the “Declaration of Trust”) represented by Articles of Amendment and Restatement filed with the State Department of Assessments and Taxation of
Maryland (the “Department”) on July 31, 2014, Articles Supplementary filed with the Department on October 10, 2006, Articles Supplementary filed with the Department on May 31, 2011, and Articles Supplementary filed with the Department on
March 14, 2018;
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(ii) |
the Fourth Amended and Restated Bylaws of the Company, adopted as of April 2, 2020 (the “Bylaws”);
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(iii) |
certain resolutions adopted by the Board of Trustees of the Company (the “Board of Trustees”) which, among other things, approve the Plan and authorize the issuance of the Shares (the
“Trustees’ Resolutions”);
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(iv) |
the Agreement and Plan of Merger, dated as of May 4, 2021 by and among the Company, Merger Sub, and MNR (the “Merger Agreement”);
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(v) |
the Registration Statement and the related form of joint proxy statement/prospectus included therein, in the form filed with the Commission pursuant to the Act;
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(vi) |
a certificate executed by two officers of the Company, dated as of a recent date (the “Officers’ Certificate”), to the effect that, among other things, the Declaration of Trust, the
Bylaws, the Trustees’ Resolutions and the Merger Agreement are true, correct and complete and have not been rescinded or modified and are in full force and effect as of the date of the Officers’ Certificate, and certifying as to the manner of
adoption or approval of the Trustees’ Resolutions and the execution and delivery of the Merger Agreement;
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(vii) |
a status certificate of the Department, dated as of a recent date, to the effect that the Company is duly formed and existing under the laws of the State of Maryland; and
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(viii) |
such other laws, records, documents, certificates, opinions and instruments as we have deemed necessary to render this opinion, subject to the limitations, assumptions and
qualifications noted below.
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(a) |
each person executing any of the Documents on behalf of any party (other than the Company) is duly authorized to do so;
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(b) |
each natural person executing any of the Documents is legally competent to do so;
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(c) |
all of the Documents submitted to us as originals are authentic; the form and content of any Documents submitted to us as unexecuted drafts do not, and will not, differ in any respect
relevant to this opinion from the form and content of such documents as executed and delivered; any of the Documents submitted to us as certified, facsimile or photostatic copies conform to the original document; all signatures on all of the
Documents are genuine; all public records reviewed or relied upon by us or on our behalf are true and complete; all statements and information contained in the Documents are true and complete; there has been no modification of, or amendment
to, any of the Documents, and there has been no waiver of any provision of any of the Documents by action or omission of the parties or otherwise;
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(d) |
all certificates submitted to us, including, without limitation, the Officers’ Certificate, are true, correct and complete both when made and as of the date hereof;
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(e) |
all representations and warranties of the Company, by and among the Company, Merger Sub, and MNR, made in, or pursuant to, the Merger Agreement (other than representations and
warranties of the Company as to legal matters on which opinions are rendered herein) are true and correct;
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(f) |
the Merger Agreement has been duly authorized, executed and delivered by the parties thereto (other than the Company) and is the legal, valid and binding obligation of the parties
thereto and is enforceable in accordance with its terms, and the Merger and related actions and transactions contemplated by the Merger Agreement, including, without limitation, the issuance of the Shares, will be consummated, and the Merger
will become effective, in the manner described in the Merger Agreement and the Registration Statement and in accordance with applicable law;
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(g) |
the issuance of the Shares will be duly approved by the requisite vote of the stockholders of the Company in accordance with the Merger Agreement and applicable law;
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(h) |
none of the terms or conditions of any agreement, plan or instrument referred to in, or contemplated by, the Merger Agreement will violate any applicable law or will conflict with, or
result in a breach or violation of, the Declaration of Trust or Bylaws of the Company, or any instrument or agreement to which the Company is a party or by which the Company is bound, or any order or decree of any court, administrative or
governmental body having jurisdiction over the Company; and
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|
(i) |
none of the Shares will be issued or transferred in violation of any restriction or limitation on ownership and transfer contained in the Declaration of Trust; and none of the Shares
will be issued or transferred to an Interested Stockholder of the Company or any Affiliate thereof, as each term is defined in Subtitle 6 of Title 3 of the Maryland General Corporation Law.
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1. |
The Company has been duly formed and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland.
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|
2. |
The issuance of the Shares has been duly authorized by all necessary real estate investment trust action on the part of the Company, and when such Shares are issued and delivered by the
Company in accordance with the Trustees’ Resolutions, the Registration Statement and the Merger Agreement, such Shares will be validly issued, fully paid and nonassessable.
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Very truly yours,
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/s/ Balllard Spahr LLP
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|
Balllard Spahr LLP
|
Fried, Frank, Harris, Shriver & Jacobson LLP
801 17th Street, NW
Washington, DC 20006
Tel: +1.202.639.7000
Fax: +1.202.639.7003
www.friedfrank.com
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Very truly yours,
|
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/s/ Fried Frank Harris Shriver & Jacobson, LLP
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Fried Frank Harris Shriver & Jacobson, LLP
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Very truly yours,
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/s/ Stroock & Stroock & Lavan LLP
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Stroock & Stroock & Lavan LLP
|
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Re: |
Amendment No. 1 to Registration Statement on Form S-4 of Equity Commonwealth, filed
July 22, 2021 (the “Amended Registration Statement”)
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(GOLDMAN SACHS & CO. LLC)
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