HRPT Properties Trust (HRP)(CWH) Announces Name Change; Reverse Split; Dividend Increase to $0.50; $231M Property Sale (GOV)
HRPT Properties Trust (NYSE: HRP)(NYSE: CWH) today announced the following corporate actions:
Name Change:
Effective July 1, 2010, HRP will change its name to “CommonWealth REIT”. On and after that date, the common shares of HRP will be traded on the New York Stock Exchange, or NYSE, under a new symbol “CWH”.
When it completed its initial public offering in 1986, HRP was known as “Health and Rehabilitation Properties Trust” and it primarily owned healthcare rehabilitation facilities. In 1994, HRP expanded its investment focus to include various senior housing facilities, and its name was changed to “Health and Retirement Properties Trust”. In 1998, HRP changed its investment focus to include commercial office properties, and the present name of “HRPT Properties Trust” was adopted. Today, HRP is primarily invested in office and industrial properties and no longer makes investments in healthcare properties. The Board of Trustees determined that adopting the new name “CommonWealth REIT” may be an appropriate way to avoid any lingering confusion that the company may be a healthcare focused real estate investment trust, or REIT.
As of March 31, 2010, HRP owned 518 properties with approximately 66.8 million square feet in over 60 markets in 34 states and Washington, DC, representing total investments of $6.6 billion. For the three months ended March 31, 2010, 41.0% of the company’s property net operating income (“NOI”) came from suburban office properties, 37.3% of NOI came from central business district, or CBD, office properties and 21.7% of NOI came from industrial and other property investments.
Reverse Share Split:
HRP also announced that its Board has determined to implement a common share combination by which the number of its common shares outstanding will be reduced by three quarters: for every four existing common shares owned, shareholders will receive one new common share. Fractional shares will be issued where appropriate.
At the company’s shareholders’ 2009 annual meeting, shareholders voted to amend HRP’s declaration of trust to permit the Board to implement a share combination in the discretion of the Board. After studying this matter, the Board has concluded that a one for four share combination is desirable because it may reduce the transaction costs for shareholders who pay brokerage commissions on the basis of the number of shares traded.
The share combination will be effective on July 1, 2010. On and after that date, shares traded on the NYSE will be the new combined shares and will trade under the new symbol “CWH”.
Dividend Increase:
HRP currently pays a regular quarterly dividend of $0.12/share ($0.48/share per year). After the reverse share split, HRP currently expects to pay a regular quarterly dividend of $0.50/share ($2.00/share per year).
The next regular quarterly dividend of $0.50/share with respect to HRP’s performance during the quarter ended June 30, 2010 is expected to be declared during July 2010. That dividend will be paid to shareholders of record on a later date to be announced when the dividend is declared.
Property Sales:
HRP has agreed to sell 15 properties to Government Properties Income Trust (NYSE: GOV) for $231 million. All of these properties are majority leased to government tenants.
The sales of properties announced today are expected to be completed in phases between today and March 31, 2011. When all of these sales are completed, HRP expects to recognize net capital gains totaling approximately $20 million (which amount does not include additional capital gains of approximately $10 million which are deferred under generally accepted accounting principles, or GAAP, because of HRP’s share ownership of GOV). Also, the cash NOI which HRP currently receives from these properties is about $19.7 million (excluding straight line rents which are recognized under GAAP), and the sales prices represent an approximately 8.5% capitalization rate of that cash NOI.
GOV was formerly a 100% owned subsidiary of HRP that is now a separately traded REIT. All of the properties to be sold to GOV were properties for which HRP had previously granted GOV rights of first refusal in the event that HRP determined to offer the properties for sale. After the sales of these properties, the U.S. Government will continue to be a large tenant for HRP. Also, HRP currently owns 9,950,000 common shares of GOV representing approximately 31.8% of GOV’s total common shares outstanding. In combination, HRP’s direct rental income from the U.S. Government and HRP’s pro rata share of GOV’s rental income from the U.S. Government will be approximately 5.8% of HRP’s combined direct rental income and its pro rata share of all GOV’s rental income.
Each of HRP and GOV are managed by Reit Management & Research LLC (“RMR”). Accordingly, the sales announced today have been negotiated by special committees of the Boards of HRP and GOV composed solely of Independent Trustees who are not also Trustees of the counterparty. Also, the agreed sales prices are within the ranges of market values determined by an independent third party appraiser.
Name Change:
Effective July 1, 2010, HRP will change its name to “CommonWealth REIT”. On and after that date, the common shares of HRP will be traded on the New York Stock Exchange, or NYSE, under a new symbol “CWH”.
When it completed its initial public offering in 1986, HRP was known as “Health and Rehabilitation Properties Trust” and it primarily owned healthcare rehabilitation facilities. In 1994, HRP expanded its investment focus to include various senior housing facilities, and its name was changed to “Health and Retirement Properties Trust”. In 1998, HRP changed its investment focus to include commercial office properties, and the present name of “HRPT Properties Trust” was adopted. Today, HRP is primarily invested in office and industrial properties and no longer makes investments in healthcare properties. The Board of Trustees determined that adopting the new name “CommonWealth REIT” may be an appropriate way to avoid any lingering confusion that the company may be a healthcare focused real estate investment trust, or REIT.
As of March 31, 2010, HRP owned 518 properties with approximately 66.8 million square feet in over 60 markets in 34 states and Washington, DC, representing total investments of $6.6 billion. For the three months ended March 31, 2010, 41.0% of the company’s property net operating income (“NOI”) came from suburban office properties, 37.3% of NOI came from central business district, or CBD, office properties and 21.7% of NOI came from industrial and other property investments.
Reverse Share Split:
HRP also announced that its Board has determined to implement a common share combination by which the number of its common shares outstanding will be reduced by three quarters: for every four existing common shares owned, shareholders will receive one new common share. Fractional shares will be issued where appropriate.
At the company’s shareholders’ 2009 annual meeting, shareholders voted to amend HRP’s declaration of trust to permit the Board to implement a share combination in the discretion of the Board. After studying this matter, the Board has concluded that a one for four share combination is desirable because it may reduce the transaction costs for shareholders who pay brokerage commissions on the basis of the number of shares traded.
The share combination will be effective on July 1, 2010. On and after that date, shares traded on the NYSE will be the new combined shares and will trade under the new symbol “CWH”.
Dividend Increase:
HRP currently pays a regular quarterly dividend of $0.12/share ($0.48/share per year). After the reverse share split, HRP currently expects to pay a regular quarterly dividend of $0.50/share ($2.00/share per year).
The next regular quarterly dividend of $0.50/share with respect to HRP’s performance during the quarter ended June 30, 2010 is expected to be declared during July 2010. That dividend will be paid to shareholders of record on a later date to be announced when the dividend is declared.
Property Sales:
HRP has agreed to sell 15 properties to Government Properties Income Trust (NYSE: GOV) for $231 million. All of these properties are majority leased to government tenants.
The sales of properties announced today are expected to be completed in phases between today and March 31, 2011. When all of these sales are completed, HRP expects to recognize net capital gains totaling approximately $20 million (which amount does not include additional capital gains of approximately $10 million which are deferred under generally accepted accounting principles, or GAAP, because of HRP’s share ownership of GOV). Also, the cash NOI which HRP currently receives from these properties is about $19.7 million (excluding straight line rents which are recognized under GAAP), and the sales prices represent an approximately 8.5% capitalization rate of that cash NOI.
GOV was formerly a 100% owned subsidiary of HRP that is now a separately traded REIT. All of the properties to be sold to GOV were properties for which HRP had previously granted GOV rights of first refusal in the event that HRP determined to offer the properties for sale. After the sales of these properties, the U.S. Government will continue to be a large tenant for HRP. Also, HRP currently owns 9,950,000 common shares of GOV representing approximately 31.8% of GOV’s total common shares outstanding. In combination, HRP’s direct rental income from the U.S. Government and HRP’s pro rata share of GOV’s rental income from the U.S. Government will be approximately 5.8% of HRP’s combined direct rental income and its pro rata share of all GOV’s rental income.
Each of HRP and GOV are managed by Reit Management & Research LLC (“RMR”). Accordingly, the sales announced today have been negotiated by special committees of the Boards of HRP and GOV composed solely of Independent Trustees who are not also Trustees of the counterparty. Also, the agreed sales prices are within the ranges of market values determined by an independent third party appraiser.
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