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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Mach Natural Resources LP | NYSE:MNR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.17 | -0.86% | 19.56 | 19.86 | 19.55 | 19.86 | 26,304 | 01:00:00 |
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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Monmouth Real Estate Investment Corporation
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(Name of Registrant as Specified in Its Charter)
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N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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To approve the Merger pursuant to the Merger Agreement (“Merger Proposal”);
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To approve on a non-binding, advisory basis, certain compensation that may be paid or become payable to Monmouth’s named executive officers in connection with the Merger Agreement and the transactions contemplated thereby (“Compensation Proposal”); and
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To approve any adjournment of the Special Meeting, if necessary or appropriate, including to solicit additional proxies in favor of the Merger Proposal (“Adjournment Proposal”).
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Sincerely,
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Eugene W. Landy
Chairman of the Board of Directors
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To approve the merger (the “Merger”) of Monmouth with and into Maple Delaware Merger Sub LLC (“Merger Sub”), a subsidiary of Industrial Logistics Properties Trust, a Maryland real estate investment trust (“ILPT”), pursuant to the Agreement and Plan of Merger, dated as of November 5, 2021 (as it may be amended, the “Merger Agreement”), by and among Monmouth, ILPT, and Merger Sub (the “Merger Proposal”);
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To approve on a non-binding, advisory basis, certain compensation that may be paid or become payable to Monmouth’s named executive officers in connection with the Merger Agreement and the transactions contemplated thereby (the “Compensation Proposal”); and
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To approve any adjournment of the Special Meeting, if necessary or appropriate, including to solicit additional proxies in favor of the Merger Proposal (the “Adjournment Proposal”).
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By Order of the Board of Directors of Monmouth Real Estate Investment Corporation,
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Michael D. Prashad
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General Counsel and Secretary
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[****]
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debt financing committed by certain lenders, pursuant to a commitment letter, dated as of the date of the Merger Agreement, to make available to ILPT a bridge loan, under which ILPT may borrow up to $4.0 billion on a short-term basis for 364 days, or alternative financing as permitted under the Merger Agreement;
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an equity contribution through investments by equity partners; and/or
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other funds available to ILPT, including through alternative or substitute financing.
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Approval by Monmouth’s common shareholders of the Merger;
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Absence of any law, regulation, temporary restraining order, preliminary or permanent injunction or other order issued by a governmental entity of competent jurisdiction after the date of the Merger Agreement that makes consummation of the Merger illegal or otherwise prohibits the consummation of the Merger;
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Accuracy of the other party’s representations and warranties, subject to customary materiality and material adverse effect qualifications with respect to certain representations and warranties;
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The other party’s performance or compliance in all material respects with all agreements and covenants required to be performed by it under the Merger Agreement prior to the Closing;
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Receipt of a certificate from an executive officer of the other party confirming the satisfaction of the two immediately preceding conditions; and
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In the case of ILPT and Merger Sub, receipt of a tax opinion of Stroock & Stroock & Lavan LLP or other nationally recognized tax counsel to Monmouth, dated as of the Closing Date, to the effect that, for all taxable periods of Monmouth commencing with Monmouth’s taxable year that ended on September 30, 2017, (i) Monmouth has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and (ii) Monmouth’s prior, current and proposed ownership, organization and method of operation have enabled Monmouth to continue to meet the requirements for qualification and taxation as a REIT under the Code (A) for all such taxable periods through and including its most recently completed taxable year and (B) for its final taxable year commencing immediately after the end of its most recently completed taxable year and concluding with (and inclusive of) the Effective Time.
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by mutual written consent of ILPT and Monmouth;
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by either ILPT or Monmouth, if the Merger is not consummated on or before May 5, 2022 (the “Outside Date”), provided that a party whose breach of any of its regulatory efforts obligations has been a principal cause of the failure of the Merger to be consummated by the Outside Date may not invoke this termination right;
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by either ILPT or Monmouth, if, after the date of the Merger Agreement, 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 has become final and non-appealable, provided that a party whose breach of any of its regulatory efforts obligations has been a principal cause of such order or action may not invoke this termination right;
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by either ILPT or Monmouth, if the approval of the Merger by Monmouth’s common shareholders is not obtained upon a vote taken thereon at a meeting of Monmouth’s shareholders (or at any adjournment or postponement thereof);
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by either ILPT or Monmouth, if the other party has breached or failed to perform any of its representations, warranties, covenants or agreements contained in the Merger Agreement, generally subject to a 45 day cure period, and such breach or failure to perform would result in a failure of a
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before the approval of the Merger by Monmouth’s common shareholders, by ILPT, if Monmouth’s board of directors or any committee thereof withholds, withdraws (or modified or qualifies in a manner adverse to ILPT) the recommendation that the holders of Monmouth Common Stock approve the Merger, fails to include such recommendation in the proxy statement, authorize, approve, adopt or recommend any competing takeover proposal, fails to recommend against any then-pending tender or exchange offer that constitutes a competing takeover proposal within certain specified time periods, or, upon ILPT’s written request, fails to reaffirm, upon certain specified circumstances and within certain specified time periods, its recommendation that Monmouth’s common shareholders approve the Merger; or
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before the approval of the Merger by Monmouth’s common shareholders, by Monmouth in order to enter into a definitive agreement with respect to a superior takeover proposal, subject to certain requirements.
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What is the proposed transaction?
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ILPT and Monmouth have entered into the Merger Agreement pursuant to which ILPT will acquire Monmouth in an all-cash transaction. Pursuant to, and subject to the terms and conditions of, the Merger Agreement, Monmouth will merge with and into Merger Sub, with Merger Sub surviving the Merger as a subsidiary of ILPT.
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What will Monmouth’s common shareholders receive in the Merger?
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At the Effective Time, each issued and outstanding share of Monmouth Common Stock will be converted automatically into the right to receive $21.00 in cash, without interest, subject to applicable withholding taxes. See “The Merger Agreement—Merger Consideration” for detailed descriptions of the Merger Consideration and treatment of securities.
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What will Monmouth’s preferred shareholders receive in the Merger?
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At the Effective Time, each issued and outstanding share of Monmouth Preferred Stock will be converted automatically into the right to receive $25.00 in cash plus accumulated and unpaid dividends to, but not including, the Closing Date. See “The Merger Agreement—Merger Consideration” for a detailed description of the Preferred Stock Consideration.
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What will holders of Monmouth’s equity awards receive in the Merger?
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At the Effective Time, each outstanding option to purchase shares of Monmouth Common Stock granted under Monmouth’s equity plans, whether vested or unvested, will be canceled and the holder thereof will be entitled to receive an amount in cash equal to the product of (i) the aggregate number of shares of Monmouth Common Stock subject to such option and (ii) the excess, if any, of the Merger Consideration over the applicable exercise price per share under such option (subject to any applicable withholding tax); provided, however, that any option that is outstanding and unexercised as of immediately prior to the Effective Time and that has a per share exercise price for Monmouth Common Stock subject to such option that equals or exceeds the Merger Consideration will be canceled without any consideration being paid or provided in respect thereof. At the Effective Time, each outstanding unvested restricted stock award issued pursuant to Monmouth’s incentive plans will be canceled and the holder thereof will receive an amount in cash equal to the sum of (i) the product of (A) the number of shares of Monmouth Common Stock subject to such restricted stock award and (B) the Merger Consideration and (ii) any accumulated and unpaid dividends with respect to such restricted stock award. See “The Merger Agreement—Merger Consideration” and “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Treatment of Equity Awards” for more information regarding the treatment of Monmouth’s equity awards.
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Will Monmouth continue to pay dividends or distributions prior to the Closing?
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The Merger Agreement permits Monmouth to declare and pay quarterly cash dividends on the outstanding Monmouth Common Stock in an amount not exceeding $0.18 per share for each completed quarter until the Closing, quarterly cash dividends on its outstanding Monmouth Preferred Stock in an amount equal to $0.3828125 per share, and distributions reasonably necessary for Monmouth to maintain its REIT status and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law).
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What happens if the market price of shares of Monmouth Common Stock changes before the Closing?
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The Merger Agreement does not provide for any change to be made to the Merger Consideration if the market price of shares of Monmouth Common Stock changes before the Closing.
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Why am I receiving this proxy statement?
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Monmouth’s board of directors is using this proxy statement to solicit proxies of Monmouth’s common shareholders in connection with the Merger Agreement and the Merger. The Merger cannot be completed unless the proposal to approve the Merger pursuant to the Merger Agreement (the “Merger Proposal”) is approved by the affirmative vote of the holders of at least two-thirds of shares of Monmouth Common Stock outstanding on the record date for the Special Meeting.
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Are shareholders being asked to vote on any other proposals at the Special Meeting in addition to the Merger Proposal?
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At the Special Meeting, Monmouth’s common shareholders will be asked to consider and vote upon the following additional proposals:
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To approve on a non-binding, advisory basis, certain compensation that may be paid or become payable to Monmouth’s named executive officers in connection with the Merger Agreement and the transactions contemplated thereby (the “Compensation Proposal”); and
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To approve any adjournment of the Special Meeting, if necessary or appropriate, including to solicit additional proxies in favor of the Merger Proposal (the “Adjournment Proposal”).
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Why is Monmouth proposing the Merger?
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The Merger provides Monmouth’s shareholders with the certainty of value and liquidity at a fixed cash amount of $21.00 per share, which represents a 24% premium to the unaffected closing share price of $16.99 as of December 18, 2020, the trading day immediately preceding the first public announcement of Blackwells Capital’s (“Blackwells”) offer to acquire Monmouth for $18.00 per share in cash (the “Unaffected Date”), and a 36% premium to the 30-day volume weighted average unaffected trading share price of $15.43 on the Unaffected Date. To review in greater detail the reasons of Monmouth’s board of directors for recommending that Monmouth’s common shareholders vote in favor of the Merger Proposal, see “The Merger—Recommendation of Monmouth’s Board of Directors and Its Reasons for the Merger.”
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When and where is the Special Meeting?
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The Special Meeting is scheduled to be held on [****], at [****], Eastern Time in a virtual-only format.
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Who can vote at the Special Meeting?
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All holders of shares of Monmouth Common Stock of record as of the close of business on [****], the record date for determining shareholders entitled to notice of and to vote at the Special Meeting, are entitled to receive notice of and to vote at the Special Meeting. As of [****], there were [****] shares of Monmouth Common Stock outstanding, held by approximately [****] holders of record. Each share of Monmouth Common Stock is entitled to one vote on each proposal presented at the Special Meeting.
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What constitutes a quorum?
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Monmouth’s Bylaws provide that, at a meeting of shareholders (including the Special Meeting), 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 will constitute a quorum. Shares that are voted and shares abstaining from voting will be treated as being present at the Special Meeting for purposes of determining whether a quorum is present.
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What vote is required to approve the proposals?
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Approval of the Merger Proposal requires the affirmative vote of the holders of at least two-thirds of the shares of Monmouth Common Stock outstanding on the record date.
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Approval of the 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 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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How does Monmouth’s board of directors recommend that Monmouth’s shareholders vote on the proposals?
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After careful consideration, Monmouth’s board of directors unanimously (i) determined that the Merger Agreement, the Merger, and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of Monmouth and its shareholders, (ii) approved the Merger Agreement, the Merger, and the other transactions contemplated by the Merger Agreement, and (iii) authorized the execution and delivery of the Merger Agreement. Monmouth’s board of directors unanimously recommends that Monmouth’s shareholders vote “FOR” the Merger Proposal, “FOR” the Compensation Proposal, and “FOR” the Adjournment Proposal.
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Do any of Monmouth’s executive officers or directors have interests in the Merger that may differ from those of its shareholders?
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Monmouth’s executive officers and directors have interests in the Merger that are different from, or in addition to, their interests as our shareholders. The members of Monmouth’s board of directors were aware of and considered these interests, among other matters, in evaluating the Merger Agreement and the Merger, and in recommending that Monmouth’s shareholders vote “FOR” the Merger Proposal. For a description of these interests, see the section entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger.”
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Are there any conditions to the Closing that must be satisfied for the Merger to be completed?
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In addition to the approval of the Merger Proposal by Monmouth’s shareholders, 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.”
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If my shares of Monmouth Common Stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of Monmouth Common Stock for me?
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If you hold your shares of Monmouth Common Stock 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 Special Meeting, you must provide your broker or other nominee with instructions on how to vote your shares. Brokers who hold shares on behalf of their customers may not give a proxy to vote those shares without specific instructions from their customers.
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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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If you do not instruct your broker, bank or nominee on how to vote your shares of Monmouth Common Stock, your broker, bank or nominee may not vote your shares on the Merger Proposal, the Compensation
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What will happen if I abstain from voting?
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If you abstain from voting it will have the same effect as a vote against the Merger Proposal, but it will have no effect on the Compensation Proposal, or the Adjournment Proposal, provided a quorum is otherwise present.
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When is the Merger expected to be completed?
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We expect to complete the Merger as soon as reasonably practicable following satisfaction of all of the required conditions to closing the Merger; however, ILPT has the right to extend the Closing Date once to a date that is no later than February 3, 2022. If Monmouth’s shareholders approve the 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 first half of 2022. However, there is no guarantee that the conditions to closing the Merger will be satisfied or that the Merger will close on this timing, or at all.
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What happens if the Merger is not completed?
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If the Merger is not approved by Monmouth’s shareholders, or if the Merger is not completed for any other reason, Monmouth’s shareholders will not receive any payment for their shares of Monmouth Common Stock pursuant to the Merger Agreement. Instead, Monmouth will remain a public company, and the Monmouth Common Stock will continue to be registered under the Exchange Act, and listed on the NYSE. Upon a termination of the Merger Agreement under certain circumstances, Monmouth will be required to pay ILPT a termination fee of $72 million or reimburse ILPT for all its out-of-pocket expenses up to $10 million. See “The Merger Agreement—Termination of the Merger Agreement—Termination Fees; Expense Reimbursement.”
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If I am a shareholder, do I need to do anything with my stock certificates now?
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No. You should not submit your stock certificates at this time. After the Merger is completed, if you held shares of Monmouth Common Stock, the paying agent will send you a letter of transmittal and instructions for tendering your shares for cash 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, shareholders will receive payment in cash pursuant to the terms of the Merger Agreement.
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What are the anticipated U.S. federal income tax consequences to me of the Merger?
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The receipt of cash in exchange for shares of Monmouth Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. You should consult your own tax advisors regarding the particular tax consequences to you of the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws). For further discussion, see “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”
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Are shareholders entitled to appraisal rights?
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No. Shareholders are not entitled to exercise appraisal rights in connection with the Merger. See “No Appraisal Rights” for more information.
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What do I need to do now?
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After you have carefully read this proxy statement, 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 shares of Monmouth Common Stock will be represented and voted at the Special Meeting.
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What happens if I sell my shares of Monmouth Common Stock before the Special Meeting?
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If you held shares of Monmouth Common Stock on the record date but transfer them prior to the Effective Time, you will retain your right to vote at the Special Meeting, but not the right to receive the Merger Consideration for those shares. The right to receive such consideration when the Merger becomes effective will pass to the person who at that time owns the shares you previously owned.
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How will my proxy be voted?
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All shares of Monmouth Common Stock entitled to vote and represented by properly completed proxies received prior to the Special Meeting, and not revoked, will be voted at the Special Meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your shares of Monmouth Common Stock should be voted on a matter, the shares represented by your proxy will be voted as Monmouth’s board of directors recommends, and therefore “FOR” the Merger Proposal, “FOR” the Compensation Proposal, and “FOR” the Adjournment Proposal. If you do not provide voting instructions to your broker, bank or other nominee, your shares of Monmouth Common Stock will NOT be voted or represented at the Special Meeting.
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Can I revoke my proxy or change my vote after I have delivered my proxy?
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Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the Special Meeting. If you are a holder of record, you can do this in any of the four following ways:
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entering a new vote by Internet or by telephone;
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completing and returning a later-dated proxy card;
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sending a written notice to Monmouth’s corporate secretary in time to be received before the Special Meeting stating that you would like to revoke your proxy; or
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attending and voting at the Special Meeting (although attendance at the Special Meeting will not, by itself, revoke a proxy).
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What does it mean if I receive more than one set of voting materials for the Special Meeting?
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You may receive more than one set of voting materials for the Special Meeting, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares of Monmouth Common Stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold your shares. If you are a holder of record and your shares of Monmouth Common Stock 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.
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Where can I find the voting results of the Special Meeting?
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Within four business days following certification of the final voting results, Monmouth intends to file a Current Report on Form 8-K with the SEC disclosing the final voting results of the Special Meeting. If final voting results are not available to Monmouth in time to file a Current Report on Form 8-K within four business days after the Special Meeting, Monmouth will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K as soon as they become available.
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Have any shareholders entered into a voting agreement in connection with the Merger?
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Yes. Mr. Eugene W. Landy, the Chairman of Monmouth’s board of directors, and Mr. Michael P. Landy, Monmouth’s President and Chief Executive Officer, have entered into a voting agreement with ILPT, pursuant to which, in their capacity as shareholders, they have agreed to vote their shares of Monmouth Common Stock, which represent approximately 3% of the total voting power of the outstanding shares of Monmouth Common Stock as of the record date for the Special Meeting, in favor of the Merger. See “The Merger—Voting Agreement.”
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Will a proxy solicitor be used?
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Yes. Monmouth has engaged MacKenzie Partners, Inc. (“MacKenzie Partners”) to assist in the solicitation of proxies for the Special Meeting. Monmouth estimates that it will pay MacKenzie Partners a fee of approximately $350,000. Monmouth has also agreed to reimburse MacKenzie Partners for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify MacKenzie Partners against certain losses, claims, damages, liabilities and expenses. In addition to mailing proxy solicitation material, Monmouth’s directors, 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 Monmouth’s directors, officers, or employees for such services.
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Who can answer my questions?
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If you have any questions about the Merger or how to submit your proxy or need additional copies of this proxy statement, the enclosed proxy card or voting instructions, you should contact:
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inability to complete the Merger because, among other reasons, one or more conditions to the closing of the Merger may not be satisfied or waived;
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uncertainty as to the timing of completion of the Merger;
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potential adverse effects or changes to relationships with tenants, employees, service providers or other parties resulting from the announcement or completion of the Merger;
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the outcome of any legal proceedings that may be instituted against the parties and others related to the Merger Agreement;
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possible disruptions from the Merger that could harm Monmouth’s business, including current plans and operations;
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availability and terms of financing, including ILPT’s financing for the Merger;
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unexpected costs, charges or expenses resulting from the Merger;
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reduced demand for, or oversupply of, industrial and logistics space in Monmouth’s markets and other conditions affecting the industries in which Monmouth operates;
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legislative, regulatory and economic developments, including changes in tax, real estate, environmental, zoning and other laws and regulations; and
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unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism, outbreak of war or hostilities and epidemics and pandemics, including COVID-19, as well as management’s response to any of the aforementioned factors.
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To approve the Merger pursuant to the Merger Agreement (the “Merger Proposal”);
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To approve on a non-binding, advisory basis, certain compensation that may be paid or become payable to Monmouth’s named executive officers in connection with the Merger Agreement and the transactions contemplated thereby (the “Compensation Proposal”); and
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To approve any adjournment of the Special Meeting, if necessary or appropriate, including to solicit additional proxies in favor of the Merger Proposal (the “Adjournment Proposal”).
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by Internet at www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on [****] (please have your proxy card in hand when you visit the website);
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by toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern Time on [****] (please follow the instructions on your proxy card or voting instruction form from your broker, bank or other nominee provided to you by email or over the Internet);
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by completing and mailing your proxy card (if you received printed proxy materials) to be received prior to the Special Meeting; or
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by attending the Special Meeting by visiting www.virtualshareholdermeeting.com/MNR2022SM, where you may vote during the meeting. Please have your proxy card or the instructions that accompanied your proxy materials in hand when you visit the website.
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entering a new vote by Internet or by telephone;
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completing and returning a later-dated proxy card;
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sending a written notice to Monmouth’s Corporate Secretary in time to be received before the Special Meeting stating that you would like to revoke your proxy; or
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attending and voting at the Special Meeting (although attendance at the Special Meeting will not, by itself, revoke a proxy).
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the Merger Consideration of $21.00 per share represents a 24% premium to the unaffected closing share price of Monmouth Common Stock of $16.99 on December 18, 2020, the last trading day prior to news reports that Blackwells had offered to acquire Monmouth for $18.00 per share in cash, and a 36% premium to the 30-day volume weighted average unaffected trading share price of $15.43;
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the Merger Consideration is higher than the all-time highest reported sales price of Monmouth Common Stock;
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the Merger Agreement permits Monmouth to continue to pay Monmouth’s common shareholders regular quarterly cash dividends of up to $0.18 per share for each completed quarter until the consummation of the Merger;
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the Merger Consideration is all cash, and the Merger provides certain and immediate value and liquidity to Monmouth’s shareholders for their shares, especially when viewed against any risks and uncertainties associated with Monmouth’s standalone strategy;
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the financial analyses presented to Monmouth’s board of directors by each of J.P. Morgan and CSCA and the November 4, 2021 oral opinions delivered by J.P. Morgan and CSCA to Monmouth’s board of directors, which were confirmed by delivery of written opinions dated November 4, 2021, to the effect that, as of such date, 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, in the case of J.P. Morgan, the consideration to be paid to Monmouth’s common shareholders pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, and, in the case of CSCA, the consideration to be received by the holders of Monmouth Common Stock in the Merger is fair, from a financial point of view, in each case as more fully described below in the section entitled “The Merger—Opinions of Monmouth’s Financial Advisors.” The full text of the written opinions of J.P. Morgan and CSCA, each dated November 4, 2021, which set forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan and CSCA in preparing their respective opinions, are attached as Annex B and Annex C to this proxy statement and are incorporated herein by reference.
|
•
|
the robust pre-signing strategic alternatives sale process conducted by J.P. Morgan and CSCA at the direction and under the supervision of Monmouth’s board of directors, which involved outreach to approximately ninety potential interested parties and an agreed and publicly disclosed transaction agreement during the initial strategic review process, and outreach to more than twenty qualified potential interested parties during the renewed strategic alternative review process, in both cases including financial sponsors, real estate investment trusts, sovereign wealth funds, pension funds, real estate managers and other financial and strategic investors, and the receipt of first round indications of interest from three potential counterparties, and a “best and final” proposal from ILPT;
|
•
|
the initial strategic alternatives process that led to the now-terminated transaction with EQC had resulted in a transaction with significant disclosure and a publicly disclosed competing proposal, and such initial process, combined with Monmouth’s renewed strategic alternatives process and the public announcement of the renewed process, put potential acquirers on notice of Monmouth’s willingness to engage in discussions for a strategic sale;
|
•
|
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;
|
•
|
the ability of Monmouth’s board of directors under the Merger Agreement, under certain specified circumstances, to consider an alternative proposal and the right of Monmouth’s board of directors, under certain specified circumstances, to withdraw its recommendation in favor of the Merger and to terminate the Merger Agreement in order to enter into an agreement with respect to a Superior Proposal, subject to payment by Monmouth of a $72 million termination fee, as well as the right of Monmouth’s board of directors, under certain specified circumstances, to withdraw its recommendation in favor of the Merger following the occurrence of an Intervening Event;
|
•
|
the course of negotiations with ILPT, which were conducted at arm’s length and during which Monmouth’s board of directors was advised by Monmouth’s legal and financial advisors;
|
•
|
the terms and conditions of the Merger Agreement, including:
|
•
|
the customary nature of the representations, warranties, and covenants of Monmouth and ILPT in the Merger Agreement;
|
•
|
the parties’ covenants to use reasonable best efforts to take the actions and to do all things necessary, proper or advisable under the Merger Agreement and applicable laws and regulations to consummate the transactions contemplated by the Merger Agreement as soon as reasonably practicable; and
|
•
|
the review of Monmouth’s board of directors, with the assistance of Monmouth’s financial and legal advisors, of the terms and conditions of comparable transactions and its overall belief that the terms of the Merger Agreement were consistent with market practice and in the best interest of Monmouth and its shareholders; and
|
•
|
the likelihood that the Merger would be completed, including after consideration of the risks related to certain conditions which will be required to complete the Merger.
|
•
|
that, following the Merger, Monmouth would no longer exist as a stand-alone public company and Monmouth’s shareholders would not participate in any future growth Monmouth might have achieved on a stand-alone basis or the combined company might achieve;
|
•
|
the risk that an alternative transaction or different strategic alternative potentially could be more beneficial to Monmouth’s shareholders than the proposed merger with ILPT;
|
•
|
that, under the terms of the Merger Agreement, Monmouth must pay ILPT a $72 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 Monmouth’s shareholders;
|
•
|
that the terms of the Merger Agreement place limitations on the ability of Monmouth to solicit, initiate or knowingly encourage or facilitate any Takeover Proposal or any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to a Takeover Proposal (as defined below) or enter into, engage in, continue or otherwise participate in any discussions or negotiations regarding the foregoing, or furnish to any person any non-public material information in connection with the foregoing;
|
•
|
the risk that the required approval of Monmouth’s shareholders for the Merger 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 in a timely manner or at all;
|
•
|
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, Monmouth’s officers and 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 Monmouth’s business;
|
•
|
the possibility that the Merger may not be completed, or may be unduly delayed, for reasons beyond the control of Monmouth or ILPT;
|
•
|
provisions in the Merger Agreement restricting operation of Monmouth’s business during the period between the signing of the Merger Agreement and consummation of the Merger, which may delay or prevent Monmouth from undertaking business opportunities that may arise or other actions Monmouth 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;
|
•
|
Monmouth’s obligation under the Merger Agreement to reimburse ILPT for up to $10.0 million of transaction expenses incurred by ILPT if the Merger is not completed due to the failure of Monmouth’s shareholders to approve the Merger;
|
•
|
the fact that the receipt of cash in exchange for shares of Monmouth Common Stock pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes; and
|
•
|
the fact that under Maryland law, Monmouth’s shareholders are not entitled to dissenters or appraisal rights in connection with the Merger.
|
•
|
reviewed a draft dated November 3, 2021 of the Merger Agreement;
|
•
|
reviewed certain publicly available business and financial information concerning Monmouth and the industries in which it operates;
|
•
|
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 Monmouth with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of shares of Monmouth Common Stock 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 Monmouth relating to its business, as discussed more fully under “The Merger—Summary of Certain Monmouth Unaudited Prospective Financial Information”; 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
|
•
|
Monmouth
|
|
| |
Implied Per Share Equity Value
|
|||
|
| |
Low
|
| |
High
|
Monmouth P/2022E AFFO
|
| |
$18.75
|
| |
$20.00
|
Monmouth P/2022E FFO
|
| |
$18.00
|
| |
$19.50
|
Monmouth Implied Capitalization Rate
|
| |
$19.00
|
| |
$20.50
|
|
| |
Implied Per Share Equity Value
|
|||
|
| |
Low
|
| |
High
|
Monmouth Discounted Cash Flow
|
| |
$11.00
|
| |
$18.25
|
•
|
Reviewed Monmouth’s (i) audited financial information for the twelve-month periods ended September 30, 2018, 2019, and 2020, respectively, (ii) draft unaudited financial information for the three-month and twelve-month periods ended September 30, 2021, and (iii) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization, including certain internal analyses and forecasts prepared by the management of Monmouth as discussed more fully under “The Merger—Summary of Certain Monmouth Unaudited Prospective Financial Information.” All of the foregoing information was prepared and provided to CSCA by Monmouth management;
|
•
|
Reviewed certain publicly available audited and unaudited financial statements and other publicly available business, financial and other information of Monmouth 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 June 30, 2021, March 31, 2021, and December 31, 2020;
|
•
|
Reviewed drafts of the Merger Agreement, the most recent draft dated November 4, 2021, and the disclosure schedules thereto;
|
•
|
Compared certain publicly available financial information of Monmouth with similar publicly available information of other comparable publicly traded industrial and net lease 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 Monmouth 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 REITs, the industrial real estate sector, 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
|
| |
Implied Cash
Capitalization Rate
|
| |
Price /
CY 2022E FFO
|
| |
Price /
CY 2022E AFFO
|
| |
Prem/(Disc.) to NAV
|
W.P. Carey Inc.
|
| |
5.7%
|
| |
16.3 x
|
| |
15.3 x
|
| |
15.0%
|
STAG Industrial, Inc.
|
| |
4.6%
|
| |
20.4 x
|
| |
22.4 x
|
| |
10.2%
|
Lexington Realty Trust
|
| |
4.9%
|
| |
19.8 x
|
| |
22.4 x
|
| |
3.2%
|
Broadstone Net Lease, Inc.
|
| |
5.1%
|
| |
18.1 x
|
| |
19.3 x
|
| |
25.8%
|
Industrial Peer Group
|
| |
Low
|
| |
Mean
|
| |
Median
|
| |
High
|
Implied Cash Capitalization Rate
|
| |
5.7%
|
| |
5.1%
|
| |
5.0%
|
| |
4.6%
|
Price / CY 2022E FFO
|
| |
16.3 x
|
| |
18.7 x
|
| |
19.0 x
|
| |
20.4 x
|
Price / CY 2022E AFFO
|
| |
15.3 x
|
| |
19.8 x
|
| |
20.9 x
|
| |
22.4 x
|
Prem/(Disc.) to NAV
|
| |
3.2%
|
| |
13.6%
|
| |
12.6%
|
| |
25.8%
|
|
| |
Monmouth
Metrics
|
| |
Industrial
Peer Group
Metrics
|
| |
Implied
Equity Value
Per Share
|
Implied Cash Capitalization Rate
|
| |
$172
|
| |
4.6% - 5.7%
|
| |
$14.11 - $20.89
|
Price / CY 2022E FFO
|
| |
$0.93
|
| |
16.3x – 20.4x
|
| |
$15.12 - $18.81
|
Price / CY 2022E AFFO
|
| |
$0.90
|
| |
15.3x – 22.4x
|
| |
$13.66 - $20.00
|
Prem/(Disc.) to NAV
|
| |
$16.90
|
| |
3.2% - 25.8%
|
| |
$17.40 - $21.19
|
|
| |
Low
|
| |
High
|
| |
Merger
Consideration
|
Monmouth Implied Equity Value Per Share
|
| |
$13.66
|
| |
$21.19
|
| |
$21.00
|
Date Announced
|
| |
Acquiror
|
| |
Target
|
| |
Implied Cash
Capitalization Rate
|
August 2021
|
| |
Blackstone Real Estate Income Trust
|
| |
WPT Industrial Real Estate
Investment Trust
|
| |
4.2%
|
May 2018
|
| |
The Blackstone Group LP
|
| |
Gramercy Property Trust
|
| |
6.1%
|
July 2015
|
| |
Global Logistic Properties Limited
|
| |
Industrial Income Trust Inc.
|
| |
5.1%
|
Precedent Transactions
|
| |
Mean
|
| |
High
|
| |
Low
|
Implied Cash Capitalization Rate
|
| |
5.2%
|
| |
4.2%
|
| |
6.1%
|
|
| |
Monmouth
Metric
|
| |
Implied
Cash Capitalization
Rates
|
| |
Implied
Equity Value
Per Share
|
Implied Cash Capitalization Rate
|
| |
$172
|
| |
4.2% - 6.1%
|
| |
$11.76 - $24.34
|
|
| |
Low
|
| |
High
|
| |
Merger
Consideration
|
Monmouth Implied Equity Value Per Share
|
| |
$11.76
|
| |
$24.34
|
| |
$21.00
|
|
| |
Monmouth
Metric
|
| |
Implied
Cash Capitalization
Rates
|
| |
Implied
Equity Value
Per Share
|
Capitalization Rate Valuation Analysis
|
| |
$172
|
| |
4.50% - 5.25%
|
| |
$16.48 - $21.97
|
|
| |
Low
|
| |
High
|
| |
Merger
Consideration
|
Monmouth Implied Equity Value Per Share
|
| |
$16.48
|
| |
$21.97
|
| |
$21.00
|
Transaction
Announcement Date
|
| |
Acquiror
|
| |
Target
|
August 2021
|
| |
Blackstone Real Estate Income Trust, Inc.
|
| |
WPT Industrial Real Estate Investment Trust
|
August 2021
|
| |
VICI Properties Inc.
|
| |
MGM Growth Properties LLC
|
July 2021
|
| |
Kite Realty Group Trust
|
| |
Retail Properties of America, Inc.
|
June 2021
|
| |
Ventas, Inc.
|
| |
New Senior Investment Group Inc.
|
April 2021
|
| |
Realty Income Corporation
|
| |
Vereit, Inc.
|
April 2021
|
| |
Kimco Realty Corporation
|
| |
Weingarten Realty Investors
|
October 2019
|
| |
Prologis, Inc.
|
| |
Liberty Property Trust
|
July 2019
|
| |
AXA Investment Managers-Real Assets
|
| |
NorthStar Realty Europe Corp.
|
May 2019
|
| |
Park Hotels & Resorts Inc.
|
| |
Chesapeake Lodging Trust
|
March 2019
|
| |
Cousins Properties Incorporated
|
| |
Tier REIT, Inc.
|
January 2019
|
| |
Omega Healthcare Investors, Inc.
|
| |
MedEquities Realty Trust, Inc.
|
September 2018
|
| |
Pebblebrook Hotel Trust
|
| |
LaSalle Hotel Properties
|
July 2018
|
| |
Brookfield Asset Management Inc.
|
| |
Forest City Realty Trust, Inc.
|
June 2018
|
| |
Greystar Investment Group, LLC
|
| |
Education Realty Trust, Inc.
|
May 2018
|
| |
Blackstone Group LP
|
| |
Gramercy Property Trust
|
April 2018
|
| |
Prologis, Inc.
|
| |
DCT Industrial Trust Inc.
|
March 2018
|
| |
Brookfield Property Partners L.P.
|
| |
GGP Inc.
|
July 2017
|
| |
Greystar Growth and Income Fund LP
|
| |
Monogram Residential Trust, Inc.
|
June 2017
|
| |
Canada Pension Plan Investment Board
|
| |
Parkway, Inc.
|
June 2017
|
| |
Government Properties Income Trust
|
| |
First Potomac Realty Trust
|
June 2017
|
| |
Digital Realty Trust, Inc.
|
| |
Dupont Fabros Technology, Inc.
|
May 2017
|
| |
Sabra Health Care REIT, Inc.
|
| |
Care Capital Properties, Inc.
|
April 2017
|
| |
RLJ Lodging Trust
|
| |
FelCor Lodging Trust Incorporated
|
February 2017
|
| |
Tricon Capital Group Inc.
|
| |
Silver Bay Realty Trust Corp.
|
January 2017
|
| |
Starwood Capital Group
|
| |
Milestone Apartments Real Estate Investment Trust
|
November 2016
|
| |
Regency Centers Corporation
|
| |
Equity One, Inc.
|
August 2016
|
| |
Mid-America Apartment Communities, Inc.
|
| |
Post Properties, Inc.
|
April 2016
|
| |
Cousins Properties Incorporated
|
| |
Parkway Properties, Inc.
|
January 2016
|
| |
Brookfield Asset Management Inc.
|
| |
Rouse Properties, Inc.
|
December 2015
|
| |
DRA Advisors LLC
|
| |
Inland Real Estate Corporation
|
December 2015
|
| |
American Homes 4 Rent
|
| |
American Residential Properties, Inc.
|
October 2015
|
| |
Harrison Street Real Estate Capital LLC
|
| |
Campus Crest Communities, Inc.
|
October 2015
|
| |
Blackstone Group LP
|
| |
Biomed Realty Trust, Inc.
|
September 2015
|
| |
Blackstone Group LP
|
| |
Strategic Hotels & Resorts, Inc.
|
Transaction
Announcement Date
|
| |
Acquiror
|
| |
Target
|
June 2015
|
| |
Lone Star Investment Advisors
|
| |
Home Properties, Inc.
|
April 2015
|
| |
Brookfield Asset Management Inc.
|
| |
Associated Estates Realty Corporation
|
April 2015
|
| |
Blackstone Group LP
|
| |
Excel Trust, Inc.
|
October 2014
|
| |
Omega Healthcare Investors, Inc.
|
| |
Aviv REIT, Inc.
|
September 2014
|
| |
Washington Prime Group Inc.
|
| |
Glimcher Realty Trust
|
August 2014
|
| |
Health Care REIT, Inc.
|
| |
HealthLease Properties Real Estate Investment Trust
|
June 2014
|
| |
Ventas, Inc.
|
| |
American Realty Capital Healthcare Trust, Inc.
|
December 2013
|
| |
Essex Property Trust, Inc.
|
| |
BRE Properties, Inc.
|
October 2013
|
| |
American Realty Capital Properties, Inc.
|
| |
Cole Real Estate Investments, Inc.
|
June 2013
|
| |
Mid-America Apartment Communities, Inc.
|
| |
Colonial Properties Trust
|
May 2013
|
| |
American Realty Capital Properties, Inc.
|
| |
CapLease, Inc.
|
|
| |
Monmouth
Metrics
|
| |
Premium Range
(25th to 75th Percentile)
|
| |
Implied
Equity Value
Per Share
|
1-Day
|
| |
$16.99
|
| |
12.7% - 19.7%
|
| |
$19.14 - $20.34
|
5-Day
|
| |
$16.16
|
| |
12.1% - 21.0%
|
| |
$18.12 - $19.55
|
2-Week
|
| |
$15.22
|
| |
12.4% - 23.5%
|
| |
$17.10 - $18.80
|
30-Day
|
| |
$14.16
|
| |
15.9% - 26.7%
|
| |
$16.40 - $17.94
|
|
| |
Low
|
| |
High
|
| |
Merger
Consideration
|
Monmouth Implied Equity Value Per Share
|
| |
$16.40
|
| |
$20.34
|
| |
$21.00
|
Terminal Value Range
|
| |
Discount Rate
|
| |
Implied Equity
Value Per Share
|
20.0 x – 23.0 x
|
| |
6.00% - 6.50%
|
| |
$15.06 - $20.65
|
|
| |
Low
|
| |
High
|
| |
Merger
Consideration
|
Monmouth Implied Equity Value Per Share
|
| |
$15.06
|
| |
$20.65
|
| |
$21.00
|
|
| |
Fiscal Year Ending September 30,
|
||||||||||||
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
| |
2026E
|
|
| |
($ in millions, except per share values)
|
||||||||||||
Net Income
|
| |
$65
|
| |
$71
|
| |
$76
|
| |
$81
|
| |
$88
|
Cash Net Operating Income (Cash NOI)(1)
|
| |
$166
|
| |
$182
|
| |
$195
|
| |
$209
|
| |
$223
|
Adjusted EBITDA (ex. Interest/Dividend Income)(2)
|
| |
$159
|
| |
$175
|
| |
$187
|
| |
$201
|
| |
$213
|
FFO per Share(3)
|
| |
$0.89
|
| |
$0.99
|
| |
$1.06
|
| |
$1.12
|
| |
$1.16
|
AFFO per Share(4)
|
| |
$0.88
|
| |
$0.96
|
| |
$1.03
|
| |
$1.10
|
| |
$1.14
|
|
| |
Calendar Year Ending December 31,
|
||||||||||||
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
| |
2026E
|
|
| |
($ in millions, except per share values)
|
||||||||||||
Net Income
|
| |
$67
|
| |
$72
|
| |
$77
|
| |
$83
|
| |
$89
|
Cash Net Operating Income (Cash NOI)(1)
|
| |
$170
|
| |
$185
|
| |
$199
|
| |
$212
|
| |
$226
|
Adjusted EBITDA (ex. Interest/Dividend Income)(2)
|
| |
$163
|
| |
$178
|
| |
$191
|
| |
$204
|
| |
$216
|
FFO per Share(3)
|
| |
$0.93
|
| |
$1.01
|
| |
$1.07
|
| |
$1.14
|
| |
$1.16
|
AFFO per Share(4)
|
| |
$0.90
|
| |
$0.98
|
| |
$1.05
|
| |
$1.11
|
| |
$1.14
|
(1)
|
Monmouth defines net operating income (“NOI”) as Net Income (Loss), as such term is defined under GAAP, attributable to Monmouth’s common shareholders, plus preferred dividends, general and administrative expenses, non-recurring costs relating to Monmouth’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. Monmouth 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)
|
Monmouth defines adjusted EBITDA (“Adjusted EBITDA”) as Net Income (Loss), as such term is defined under GAAP, attributable to Monmouth’s common shareholders, plus preferred dividend expense, interest expense, including amortization of financing costs, depreciation, amortization of capitalized lease costs and intangible assets, non-recurring strategic alternatives and proxy costs (including litigation and certain other non-routine costs) 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)
|
Monmouth 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 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, Monmouth 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)
|
Monmouth 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 Monmouth’s strategic alternative process and 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 Monmouth’s existing properties or capital expenditures that are incurred in conjunction with obtaining a new lease or a lease renewal.
|
|
| |
3 Months Ended
December 31, 2021E
|
| |
Calendar Year Ended December 31,
|
||||||||||||
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
| |
2026E
|
|||
|
| |
($ in millions)
|
|||||||||||||||
Unlevered Free Cash Flow(5)
|
| |
$(1)
|
| |
$(101)
|
| |
($53)
|
| |
$(41)
|
| |
$(28)
|
| |
$41
|
(5)
|
Unlevered Free Cash Flow was determined by making adjustments (including straight-line rent adjustment, capital expenditures and acquisitions and excluding certain non-recurring expenses) to Adjusted EBITDA (ex. Interest/Dividend Income).
|
•
|
debt financing committed by certain lenders, pursuant to a commitment letter, dated as of the date of the Merger Agreement (the “Debt Commitment Letter”), to make available to ILPT a bridge loan, under which ILPT may borrow up to $4.0 billion on a short-term basis for 364 days (the “Debt Financing”), or alternative financing as permitted under the Merger Agreement;
|
•
|
an equity contribution through investments by equity partners; and/or
|
•
|
other funds available to ILPT, including through alternative or substitute financing.
|
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
|
•
|
The relevant price per share of Monmouth Common Stock is $21.00, which is the Merger Consideration;
|
•
|
The Effective Time as referenced in this section occurs on December 8, 2021, which is the assumed date of the Effective Time solely for purposes of the disclosure in this section; and
|
•
|
The employment of each executive officer was terminated by Monmouth without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the relevant plans and agreements), in either case immediately following the Merger and on the assumed date of the Effective Time of December 8, 2021.
|
•
|
The relevant price per share of Monmouth Common Stock is $21.00, which is the Merger Consideration;
|
•
|
The Effective Time as referenced in this section occurs on December 8, 2021, which is the assumed date of the Effective Time solely for purposes of the disclosure in this section; and
|
•
|
The employment of each executive officer was terminated by Monmouth without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the relevant plans and agreements), in either case immediately following the Merger and on the assumed date of the Effective Time of December 8, 2021.
|
Name
|
| |
Cash
($)(1)
|
| |
Equity
($)(2)
|
| |
Perquisites/
Benefits
($)(3)
|
| |
Total ($)(5)
|
Eugene W. Landy
|
| |
3,000,000
|
| |
1,192,391
|
| |
52,915
|
| |
4,245,306
|
Michael P. Landy
|
| |
3,876,612
|
| |
313,389
|
| |
132,897
|
| |
4,322,898
|
Kevin S. Miller
|
| |
2,602,500
|
| |
5,241
|
| |
114,117
|
| |
2,721,858
|
Michael D. Prashad
|
| |
550,000
|
| |
-0-
|
| |
39,878
|
| |
589,878
|
Richard P. Molke
|
| |
550,000
|
| |
-0-
|
| |
68,209
|
| |
618,209
|
(1)
|
Cash. The amounts in this column represent (a) the cash severance to which Monmouth’s executive officers may become entitled under their employment agreements or pursuant to the CIC Plan, as applicable, with Monmouth, as described in the section above entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Management Arrangements” and (b) with respect to Eugene Landy, the transaction bonus to which he is entitled under his employment agreement with Monmouth as described in the section above entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Management Arrangements.” For the avoidance of doubt, the amounts described in this table for Mr. Miller are based on the terms of the amended and restated employment agreement described above. This column does not reflect any awards to executives under the Transaction Success Program as the recipients of such awards and their respective award amounts have not yet been determined as of the date of this proxy statement. The following table separately quantifies each component of cash severance (as described in that column of the above table entitled “Cash”) which the executive officers may become entitled to receive upon a termination of employment by Monmouth (or a successor) without “cause” or by the executive officer for “good reason”, or, with respect to Eugene Landy, any termination of employment, in each case, under the terms of the applicable agreement or plan in connection with a change in control. The table also quantifies the transaction bonus to which Eugene Landy is entitled under the terms of his employment agreement with Monmouth.
|
Name
|
| |
Salary
Severance
($)
|
| |
Bonus
Severance
($)
|
| |
Transaction
Bonus
($)
|
| |
Total Cash
($)
|
Eugene W. Landy
|
| |
500,000
|
| |
—
|
| |
$2,500,000
|
| |
$3,000,000
|
Michael P. Landy
|
| |
2,871,612
|
| |
1,005,000
|
| |
—
|
| |
3,876,612
|
Kevin S. Miller
|
| |
2,100,000
|
| |
502,500
|
| |
—
|
| |
2,602,500
|
Michael D. Prashad
|
| |
550,000
|
| |
—
|
| |
—
|
| |
550,000
|
Richard P. Molke
|
| |
550,000
|
| |
—
|
| |
—
|
| |
550,000
|
(2)
|
Equity. The amounts in this column represent (a) the estimated amounts payable pursuant to the Merger Agreement to each executive officer in respect of the unvested restricted stock awards and unvested stock options held by such executive officer, as described in the section above entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Treatment of Monmouth’s Equity Awards”, which amounts are shown by award type in the table below, and (b) for Eugene Landy, an additional grant of 50,000 shares in accordance with the terms of his employment agreement with Monmouth as described in the section above entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Management Arrangements.”
|
Name
|
| |
Value of
Unvested
Shares of
Restricted
Stock
($)
|
| |
Value of
Unvested
Options
($)
|
| |
Additional Stock
Grant ($)
|
| |
Total Equity
(Unvested
Awards)
($)
|
Eugene W. Landy
|
| |
5,241
|
| |
137,150
|
| |
1,050,000
|
| |
1,192,391
|
Michael P. Landy
|
| |
313,389
|
| |
-0-
|
| |
-0-
|
| |
313,389
|
Kevin S. Miller
|
| |
5,241
|
| |
-0-
|
| |
-0-
|
| |
5,241
|
Michael D. Prashad
|
| |
-0-
|
| |
-0-
|
| |
-0-
|
| |
-0-
|
Richard P. Molke
|
| |
-0-
|
| |
-0-
|
| |
-0-
|
| |
-0-
|
(3)
|
Perquisites/Benefits. The amounts in this column represent the estimated value of the continued health care coverage benefits following a qualifying termination to which each of Monmouth’s executive officers may become entitled under his employment agreement or the CIC Severance Plan, as applicable, as described in the section above entitled “The Merger—Interests of Monmouth’s Executive Officers and Directors in the Merger—Management Arrangements.” Additionally, the amounts reflect a lump-sum payment equal to the executive officer’s accrued but unused vacation to which they would be entitled upon termination of employment. For purposes of this disclosure, the amounts listed here are based on healthcare coverage elections and premiums for 2021 and the vacation allowance to be credited as of January 1, 2022 and using 2021 base salary rates (without taking into consideration any potential 2022 merit or market based increases) for all employees other than Michael Landy and Kevin Miller (for whom calculation is based on increased rate of base salary to be effective as of January 1, 2022). Actual payouts at termination would be reduced by vacation used between January 1, 2022 and the Closing. The following table shows the estimated value of each of these benefits.
|
Name
|
| |
COBRA/
HealthCare
Continuation
($)
|
| |
Accrued
Vacation
($)
|
| |
Total Perquisites/
Other
Benefits
($)
|
Eugene W. Landy
|
| |
11,521
|
| |
41,394
|
| |
52,915
|
Michael P. Landy
|
| |
59,265
|
| |
73,632
|
| |
132,897
|
Kevin S. Miller
|
| |
60,271
|
| |
53,846
|
| |
114,117
|
Michael D. Prashad
|
| |
18,724
|
| |
21,154
|
| |
39,878
|
Richard P. Molke
|
| |
47,055
|
| |
21,154
|
| |
68,209
|
|
| |
Range
|
| |
Cash
Dividend
per Share
|
|||
Year
|
| |
High
|
| |
Low
|
| ||
Fiscal Year Ended 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 Ended 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
|
| |
$19.65
|
| |
$17.92
|
| |
$0.18
|
Fourth Quarter
|
| |
$19.35
|
| |
$18.42
|
| |
$0.18
|
Fiscal Year Ending September 30, 2022
|
| |
|
| |
|
| |
|
First Quarter (through [****], 2021)(1)
|
| |
$[****]
|
| |
$[****]
|
| |
$0.18(2)
|
(1)
|
On November 4, 2021, the last trading day prior to the date of the public announcement of the execution of the Merger Agreement, the reported closing price per share for Monmouth Common Stock on the NYSE was $18.86. On [****], 2021, the last trading day before the filing of this proxy statement with the SEC, the reported closing price per share for Monmouth Common Stock on the NYSE was $[****]. You are encouraged to obtain current market quotations for Monmouth Common Stock.
|
(2)
|
As permitted under the terms of the Merger Agreement, Monmouth will pay the previously announced regular quarterly dividend of $0.18 per share of Monmouth Common Stock on December 15, 2021 to common shareholders of record as of November 15, 2021.
|
|
| |
Monmouth Common Stock
|
| |
Monmouth Preferred Stock
|
||||||
Name and Address of Beneficial Owner
|
| |
Amount and
Nature of
Beneficial
Ownership(1)
|
| |
Percentage of
Common
Stock
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)
|
| |
9,641,584
|
| |
9.80%
|
| |
|
| |
|
BlackRock, Inc.
40 East 52nd
Street New York, NY 10022(5)
|
| |
8,871,643
|
| |
9.02%
|
| |
|
| |
|
Kiernan Conway
|
| |
1,041
|
| |
*
|
| |
|
| |
|
Daniel D. Cronheim(6)
|
| |
182,670
|
| |
*
|
| |
2,550
|
| |
*
|
Catherine B. Elflein(7)
|
| |
17,566
|
| |
*
|
| |
|
| |
|
Brian H. Haimm(8)
|
| |
16,748
|
| |
*
|
| |
|
| |
|
Neal Herstik(9)
|
| |
24,971
|
| |
*
|
| |
2,800
|
| |
*
|
Matthew I. Hirsch(10)
|
| |
80,167
|
| |
*
|
| |
|
| |
|
Eugene W. Landy(11)
|
| |
1,925,143
|
| |
1.96%
|
| |
|
| |
|
Michael P. Landy(12)
|
| |
807,115
|
| |
*
|
| |
|
| |
|
Samuel A. Landy(13)
|
| |
348,179
|
| |
*
|
| |
|
| |
|
Kevin S. Miller(14)
|
| |
102,470
|
| |
*
|
| |
|
| |
|
Richard P. Molke(15)
|
| |
35,966
|
| |
*
|
| |
10,000
|
| |
*
|
Gregory T. Otto
|
| |
5,375
|
| |
*
|
| |
|
| |
|
Sonal Pande
|
| |
292
|
| |
*
|
| |
|
| |
|
Michael D. Prashad(16)
|
| |
47,613
|
| |
*
|
| |
|
| |
|
Scott L. Robinson(17)
|
| |
10,276
|
| |
*
|
| |
|
| |
|
Directors and Executive Officers as a Group(18)
|
| |
3,671,128
|
| |
3.73%
|
| |
15,720
|
| |
*
|
*
|
Less than 1%.
|
(1)
|
Except as indicated in the footnotes to this table and pursuant to applicable community property laws, Monmouth believes that the persons named in the table have sole voting and investment power with respect to the shares listed.
|
(2)
|
Based on the number of shares of Monmouth Common Stock outstanding on December 8, 2021, which was 98,486,235.
|
(3)
|
Based on the number of shares of Monmouth Preferred Stock outstanding on December 8, 2021, which was 21,985,616.
|
(4)
|
Based on Schedule 13F filed with the SEC on November 12, 2021.
|
(5)
|
Based on Schedule 13F filed with the SEC on November 9, 2021.
|
(6)
|
Includes (a) 247 shares of unvested restricted stock, (b) 86,269 shares of Monmouth Common Stock 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 shares of Monmouth Common Stock pledged in a margin account.
|
(7)
|
Includes (a) 247 shares of unvested restricted stock and (b) 3,500 shares of Monmouth Common Stock owned jointly with Ms. Elflein’s husband.
|
(8)
|
Includes 247 shares of unvested restricted stock.
|
(9)
|
Includes (a) 247 shares of unvested restricted stock and (b) 1,600 shares of Monmouth Common Stock owned by Mr. Herstik’s wife. As of December 8, 2021, Mr. Herstik also owned 2,400 shares of Monmouth Preferred Stock and 400 shares of Monmouth Preferred Stock are owned by the Gross, Truss & Herstik Profit Sharing Plan, over which Mr. Herstik has shared voting power and shared dispositive power.
|
(10)
|
Includes (a) 247 shares of unvested restricted stock and (b) 3,441 shares of Monmouth Common Stock owned by Mr. Hirsch’s wife.
|
(11)
|
Includes (a) 247 shares of unvested restricted stock, (b) 97,914 shares of Monmouth Common Stock owned by Mr. Eugene Landy’s wife, (c) 201,427 shares of Monmouth Common Stock 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 shares of Monmouth Common Stock held in the Landy & Landy Employees’ Pension Plan over which Mr. Landy has shared voting and dispositive power, (e) 13,048 shares of Monmouth Common Stock held in Landy Investments Ltd., over which Mr. Landy has shared voting and dispositive power, (f) 194,405 shares of Monmouth Common Stock 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 shares of Monmouth Common Stock held by Juniper Plaza Associates, over which Mr. Landy has shared voting and dispositive power, (h) 32,866 shares of Monmouth Common Stock held by Windsor Industrial Park Associates, over which Mr. Landy has shared voting and dispositive power; (i) 499,451 shares of Monmouth Common Stock pledged in a margin account and (j) 474,017 shares of Monmouth Common Stock pledged as security for loans. Includes 65,000 shares of Monmouth Common Stock issuable upon the exercise of stock options that are exercisable within 60 days of December 8, 2021. Excludes 65,000 shares of Monmouth Common Stock issuable upon the exercise of a stock option not exercisable within 60 days of December 8, 2021.
|
(12)
|
Includes (a) 14,796 shares of unvested restricted stock, (b) 42,587 shares of Monmouth Common Stock owned by Mr. Michael Landy’s wife, (c) 190,032 shares of Monmouth Common Stock held in custodial accounts for Mr. Landy’s children under the New Jersey Uniform Transfer to Minors Act, (d) 53,000 shares of Monmouth Common Stock held by EWL Grandchildren Fund, LLC, over which Mr. Landy has shared voting power and shared dispositive power, (e) 34,925 shares of Monmouth Common Stock held in the UMH 401(k) Plan for Mr. Landy’s benefit and (f) 223,150 shares of Monmouth Common Stock pledged in a margin account.
|
(13)
|
Includes (a) 247 shares of unvested restricted stock, (b) 25,524 shares of Monmouth Common Stock owned by Mr. Samuel Landy’s wife, (c) 22,379 shares of Monmouth Common Stock held by the Samuel Landy Family Limited Partnership, over which Mr. Landy has shared voting power and shared dispositive power, (d) 53,000 shares of Monmouth Common Stock held in EWL Grandchildren Fund, LLC, over which Mr. Landy has shared voting power and shared dispositive power, (e) 18,385 shares of Monmouth Common Stock pledged in a margin account, (f) 181,454 shares of Monmouth Common Stock pledged as security for a loan and (g) 65,097 shares of Monmouth Common Stock 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 200,699 shares of Monmouth Common Stock held in the UMH 401(k) Plan. He, however, disclaims beneficial ownership of all of the shares of Monmouth Common Stock held by the UMH 401(k) Plan, except for the 65,097 shares of Monmouth Common Stock held by the UMH 401(k) Plan for his benefit.
|
(14)
|
Includes (a) 247 shares of unvested restricted stock and (b) 2,765 shares of Monmouth Common Stock held in the UMH 401(k) Plan for Mr. Miller’s benefit.
|
(15)
|
Includes (a) 5,437 shares of Monmouth Common Stock held in the UMH 401(k) Plan for Mr. Molke’s benefit, (b) 30,000 shares of Monmouth Common Stock issuable upon the exercise of a stock option that is exercisable within 60 days of December 8, 2021; and (c) 10,000 shares of Monmouth Preferred Stock pledged in a margin account.
|
(16)
|
Includes (a) 2,122 shares of Monmouth Common Stock held in the UMH 401(k) Plan for Mr. Prashad’s benefit and (b) 45,000 shares of Monmouth Common Stock issuable upon the exercise of a stock option that is exercisable within 60 days of December 8, 2021.
|
(17)
|
Includes 247 shares of unvested restricted stock.
|
(18)
|
Includes beneficial ownership by all of Monmouth’s current directors and executive officers.
|
•
|
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 requirement for 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 in the proxy statement;
|
•
|
absence of certain changes since December 31, 2020;
|
•
|
absence of material undisclosed liabilities;
|
•
|
compliance with laws and permits;
|
•
|
litigation;
|
•
|
insurance matters;
|
•
|
properties;
|
•
|
receipt of fairness opinions from J.P. Morgan and CSCA;
|
•
|
tax matters;
|
•
|
employee benefit plans and ERISA;
|
•
|
employee and labor matters;
|
•
|
environmental matters;
|
•
|
intellectual property;
|
•
|
material contracts;
|
•
|
investment banker, broker, finder or other similar fees;
|
•
|
inapplicability of takeover statutes;
|
•
|
absence of material undisclosed related party transactions; and
|
•
|
absence of requirement to register under the Investment Company Act.
|
•
|
due organization, valid existence, good standing and qualification to conduct business;
|
•
|
power and authority, due authorization and enforceability of the Merger Agreement;
|
•
|
absence of requirement for 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; limited assets, liabilities, and obligations of the Merger Sub;
|
•
|
accuracy of information supplied for the proxy statement;
|
•
|
litigation;
|
•
|
investment banker, broker, finder or other similar fees;
|
•
|
no ownership of shares of Monmouth Common Stock;
|
•
|
financing;
|
•
|
absence of status as an “interested stockholder” under Maryland law;
|
•
|
solvency; and
|
•
|
absence of certain arrangements relating to Monmouth.
|
(a)
|
changes or fluctuations in the United States or global economy or any securities, capital, credit or financial markets or market conditions, including changes in interest rates, inflation and credit conditions;
|
(b)
|
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), or any acts of civil disobedience or unrest or responses thereto;
|
(c)
|
changes that are the result of factors generally affecting the real estate industry or the geographic areas in which Monmouth or any of its subsidiaries operate;
|
(d)
|
any loss of, or adverse change in, the relationship of Monmouth or any of its subsidiaries with its lessees, employees, suppliers, financing sources, business partners, regulators or other third parties caused by the identity of ILPT, the execution of the Merger Agreement or the announcement, negotiation, existence or performance of the transactions contemplated by the Merger Agreement (provided, that this clause (d) will not apply to the use of Company Material Adverse Effect in Monmouth’s representations and warranties regarding absence of conflict with or violation of organizational documents, applicable laws, or certain agreements, or closing condition related to such representations and warranties);
|
(e)
|
changes in GAAP, the rules or policies of the Public Company Accounting Oversight Board or any applicable law or interpretation, application or enforcement of any of the foregoing;
|
(f)
|
any failure by Monmouth to meet any internal or external projections, forecasts or estimates of revenues, earnings, cash flow, funds from operations or other metrics for any period (provided that the exception in this clause (f) will not preclude a determination that any event, change, circumstance or effect underlying such failure has resulted in, or contributed to, a Company Material Adverse Effect, to the extent not otherwise excluded under other clauses);
|
(g)
|
the suspension of trading in securities on the NYSE or a decline in the price, or a change in the trading volume, of the Monmouth Common Stock on the NYSE (provided that the exception in this clause (g) will not preclude a determination that any event, change, circumstance or effect underlying such suspension or decline has resulted in, or contributed to, a Company Material Adverse Effect, to the extent not otherwise excluded under other clauses);
|
(h)
|
any event, change, circumstance or effect resulting from or relating to (i) COVID-19 or (ii) any outbreak, ongoing effect, worsening or additional waves of contagious disease, epidemic or pandemic or any state of emergency, martial law, shelter-in-place, quarantine, stay-at-home, social distance, shutdown, closure, sequester, masking, vaccine or similar directive, policy, recommendation, guidance or other action by any governmental or quasi-governmental entity (“Contagion Event”) in response or related thereto, in each case arising from COVID-19;
|
(i)
|
any event, change, circumstance or effect resulting from or relating to any earthquakes, hurricanes, tornados or other weather conditions, natural disasters, Contagion Events (other than COVID-19, which is the subject of clause (h)) or force majeure events;
|
(j)
|
any change or announcement of a potential change in the credit rating of Monmouth or any of its subsidiaries or any of their securities (provided that the exception in this clause (j) will not preclude a determination that any event, change, circumstance or effect underlying such change or announcement of a potential change has resulted in, or contributed to, a Company Material Adverse Effect, to the extent not otherwise excluded under other clauses); or
|
(k)
|
compliance by Monmouth with the terms of the Merger Agreement, including the failure of Monmouth to take any action as a result of the interim operating covenants, or any actions taken, or failure to take any action, which ILPT has requested in writing or to which ILPT has consented in writing.
|
(a)
|
amend or propose or agree to amend (in the case of any subsidiaries, in any material respect) any of its organizational documents or waive the stock ownership limit under Monmouth’s charter;
|
(b)
|
authorize, declare, set aside, make or pay any dividend or other distribution in respect of any of its capital stock, except for (A) certain intercompany dividends or distributions, (B) the declaration and payment by Monmouth of quarterly cash dividends on its outstanding Monmouth Common Stock, in the ordinary course of business consistent with past practice, for each completed quarter between the signing of the Merger Agreement and the Closing Date, in an amount not exceeding $0.18 per share and (C) the declaration and payment by Monmouth of quarterly cash dividends on the outstanding Monmouth Preferred Stock in an amount equal to $0.3828125 per share; provided that notwithstanding the restriction on dividends and other distributions in this clause (b), Monmouth and its subsidiaries will be permitted to make distributions reasonably necessary for Monmouth to maintain its REIT status and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law) (and such dividends in excess of the dividends permitted under clause (B) above will reduce the Merger Consideration on a dollar-for-dollar basis);
|
(c)
|
adjust, split, combine or reclassify any of its capital stock or other ownership interests 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 respect of, in lieu of, or in substitution for, shares of its capital stock or other ownership interests;
|
(d)
|
repurchase, redeem or otherwise acquire any shares of the capital stock of Monmouth 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 Monmouth’s restricted stock awards in accordance with their terms and Monmouth’s incentive plans in effect on the date of the Merger Agreement;
|
(e)
|
issue, sell, grant, pledge, amend, grant any rights in respect of or otherwise encumber any shares of its capital stock or equity interests 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 Monmouth, except for (i) the issuance of Monmouth Common Stock in connection with the exercise
|
(f)
|
merge or consolidate with any other person or acquire any material assets or material properties or make a material investment in (whether through the acquisition of stock, assets or otherwise) any other person, except certain intercompany transactions;
|
(g)
|
sell, mortgage, pledge, assign, transfer, subject to a material lien (except for certain permitted liens), effect a deed or assignment in lieu of foreclosure with respect to or otherwise dispose of any Monmouth real property or the material assets of Monmouth or of its subsidiaries;
|
(h)
|
make any loan, advance, capital contribution or other investment in any person, except certain intercompany transactions;
|
(i)
|
create, incur, refinance, replace, prepay, assume or guarantee any indebtedness for borrowed money or issue any debt securities, except for (i) certain intercompany indebtedness, (ii) indebtedness under Monmouth’s existing credit agreement and margin loan facility, (iii) any indebtedness incurred to replace, renew, extend, refinance or refund any existing indebtedness (subject to certain limitations), (iv) certain intercompany guarantees or credit support (subject to certain limitations), (v) indebtedness incurred pursuant to material contracts in effect prior to the execution of the Merger Agreement, and (vi) any indebtedness up to $250 million (subject to certain limitations);
|
(j)
|
make or commit to make capital expenditures in excess of $1 million in the aggregate, other than in conjunction with emergency repairs or as required by law or pursuant to the terms of any indebtedness, facility lease or material contract in effect as of the date of the Merger Agreement or permitted by the Merger Agreement, or in accordance with the capital expenditure budget set forth in the disclosure schedules;
|
(k)
|
except as required by contracts in effect prior to the execution and delivery of the Merger Agreement or Monmouth’s benefit plans:
|
(i)
|
materially increase the compensation or other benefits payable or provided to Monmouth’s or its subsidiary’s current or former directors, employees or officers;
|
(ii)
|
enter into or amend any employment, change of control, severance or retention agreement with any employee, director or officer of Monmouth or its subsidiary;
|
(iii)
|
award, or commit to pay or award, any bonus or incentive compensation (other than payment of bonuses and incentive compensation in the ordinary course of business consistent with past practice for completed bonus periods);
|
(iv)
|
hire, engage, or terminate (other than for cause) the employment of any officer or employee of Monmouth or any of its subsidiaries (other than hiring of replacements for any such officer or employee who voluntarily resigns, or dies or becomes disabled);
|
(v)
|
take any action to accelerate any payment or benefit, or the funding of any payment or benefit, payable or to become payable to any directors, employees or officers;
|
(vi)
|
establish, adopt, enter into, amend or terminate any material benefit plan, 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, except as is required to comply with Section 409A of the Code;
|
(i)
|
waive, release, assign, settle or compromise any action, claim, suit, complaint, arbitration, subpoena, injunction or proceeding (an “Action”) against Monmouth or its subsidiaries pending or threatened before a governmental entity, except as required by any contract in effect prior to the date of the Merger Agreement, for settlements or compromises involving total payments of less than $2.5 million in the aggregate, or with respect to any Action relating to the Merger Agreement or the transaction contemplated by the Merger Agreement or any alternative thereto; or
|
(ii)
|
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;
|
(m)
|
except in the ordinary course consistent with past practice:
|
(i)
|
modify, renew or amend in a way that is materially adverse to Monmouth or any of its subsidiaries, or waive, release, compromise or assign any material rights or claims of Monmouth or any of its subsidiaries under, or terminate any material contract, facility lease, property transfer contract or development contract (other than any expiration in accordance with the terms of such contract or an automatic renewal of any such contract, except, with respect to any automatic renewal of a facility lease, only after providing prior written notice to, and reasonably consulting with, ILPT if Monmouth or the applicable subsidiary has the right to terminate such facility lease on the date such facility lease otherwise would have renewed), or waive, release, compromise or assign any material rights or material claims under any of the foregoing contracts;
|
(ii)
|
enter into any successor agreement to an expiring material contract, facility lease, property transfer contract or development contract, or any management agreement or broker agreement, that changes the terms of the expiring contract in a way that is materially adverse to Monmouth or any of its subsidiaries;
|
(iii)
|
enter into any new management agreement, broker agreement or agreement that would have been a material contract, facility lease, property transfer contract or development contract if it were entered into at or prior to the date of the Merger Agreement;
|
(n)
|
except as required by applicable law or changes in GAAP, materially change any of its financial accounting policies;
|
(o)
|
except to the extent required by law or to the extent necessary to preserve Monmouth’s REIT qualification or any subsidiary’s status 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:
|
(i)
|
enter into or modify in a manner materially adverse to Monmouth any tax protection agreement;
|
(ii)
|
make, change or rescind any material election relating to taxes;
|
(iii)
|
change a material method of tax accounting;
|
(iv)
|
file or amend any material tax return;
|
(v)
|
settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment;
|
(vi)
|
enter into any closing agreement related to a material amount of taxes;
|
(vii)
|
knowingly surrender any right to claim any material tax refund; or
|
(viii)
|
except in the ordinary course of business consistent with past practice, give or request any waiver of a statute of limitations with respect to any material tax return; or
|
(p)
|
terminate, cancel, amend or modify any insurance policy if, as a result, Monmouth or any of its subsidiaries would not be in compliance with any facility lease or material contract (provided that in no event will Monmouth terminate, cancel, amend or modify its directors’ and officers’ liability insurance policies in effect as of the date of the Merger Agreement);
|
(q)
|
enter into any material new line of business;
|
(r)
|
take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause Monmouth to fail to qualify for taxation as a REIT or cause any of its subsidiaries 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 (subject to certain limitations);
|
(s)
|
adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Monmouth or make any filing in connection with any bankruptcy or reorganization under United States federal bankruptcy laws or any similar state or federal law; or
|
(t)
|
authorize any of, or commit, resolve, propose or agree to take any of the foregoing actions.
|
•
|
furnish to ILPT and the debt providers under the Debt Commitment Letter (collectively, the “Financing Parties”) historical financial statements and other pertinent financial information regarding Monmouth and its subsidiaries to the extent reasonably requested by ILPT and customary in connection with the Debt Financing;
|
•
|
furnish to ILPT and the Financing Parties customary information regarding Monmouth and its subsidiaries (including information to be used in the preparation of one or more information packages regarding the business, operations, financial projections and prospects of Monmouth and its subsidiaries) to the extent reasonably available to Monmouth and its subsidiaries and reasonably requested by ILPT;
|
•
|
provide reasonable and customary assistance to ILPT in the preparation of (A) customary offering documents, offering memoranda, roadshow presentations, bridge teasers, syndication documents and other syndication materials, including information memoranda and lender presentations for any portion of the Debt Financing, (B) materials for rating agency presentations and (C) other marketing materials reasonably requested by ILPT and reasonably necessary for the Debt Financing or Alternative Financing or Replacement Financing obtained in accordance with provisions above;
|
•
|
make appropriate members of senior management of Monmouth available at reasonable times and locations and upon reasonable prior notice, to participate in a reasonable number of meetings, drafting sessions, presentations, road shows, rating agency presentations and due diligence sessions and other syndication activities, provided that any such meeting or communication may be conducted virtually by videoconference or other media;
|
•
|
cause Monmouth’s independent auditors to deliver (A) customary “comfort letters” in connection with the Debt Financing and (B) customary consent to use of their audit reports in any materials reasonably necessary for the Debt Financing;
|
•
|
provide customary authorization letters authorizing the distribution of Monmouth information to prospective lenders in connection with a syndicated bank financing (including customary representations);
|
•
|
cooperate with ILPT and Merger Sub in their obtaining customary corporate and facilities credit ratings;
|
•
|
provide customary prepayment notices within the time period contemplated by (A) Monmouth’s existing credit agreement and (B) any other agreements relating to debt of Monmouth or any of its subsidiaries as ILPT may reasonably request;
|
•
|
provide customary documents reasonably requested by ILPT relating to (A) the repayment of (1) Monmouth’s existing credit agreement and (2) any other agreements relating to debt of Monmouth or any of its subsidiaries as ILPT may reasonably request, and (B) the release of related liens (if any), including using reasonable best efforts to obtain customary payoff letters in respect of Monmouth’s existing credit agreement and such other agreements relating to debt of Monmouth or any of its subsidiaries at least five business days prior to the Closing;
|
•
|
provide all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations relating to Monmouth or any of its subsidiaries;
|
•
|
cooperate with due diligence of the Financing Parties, to the extent customary and reasonable;
|
•
|
consent to the use of Monmouth’s and its subsidiaries’ logos in connection with the Debt Financing; provided that such logos are used solely in a manner that is not intended to, nor reasonably likely to, harm or disparage Monmouth or any of its subsidiaries or Monmouth’s or any of its subsidiaries’ reputation or goodwill;
|
•
|
provide customary and reasonable assistance requested by ILPT in connection with ILPT’s preparation of pro forma financial statements and pro forma financial information;
|
•
|
provide customary certificates and other customary closing documents as may be reasonably requested in writing by the Financing Parties (provided that no obligation of Monmouth or any of its subsidiaries under any such certificate or document will be effective until the Closing);
|
•
|
cause the taking of corporate actions and organizational changes reasonably requested by ILPT and within the control of Monmouth that are reasonably necessary to permit the completion of the Debt Financing;
|
•
|
reasonably assist in the preparation of, and executing and delivering at Closing, the Definitive Agreements and any indentures, notes and purchase agreements relating to the Debt Financing, including assisting with the execution and delivery as of the Closing of any guarantee and collateral documents and customary closing certificates as may be reasonably requested by ILPT and required by the Debt Commitment Letter or the Debt Financing (provided that no obligation of Monmouth or any of its subsidiaries under any such document, agreement or certificate will be effective until the Closing) and otherwise use commercially reasonable efforts to provide customary and reasonable assistance requested by ILPT in connection with satisfying the conditions precedent set forth in the Definitive Agreements;
|
•
|
reasonably cooperate with ILPT’s legal counsel in connection with any legal opinion that such legal counsel may be required to deliver in connection with the Debt Financing;
|
•
|
to the extent necessary or advisable, reasonably cooperate to facilitate the pledging of collateral and the executing and delivering of customary pledge and security documents or other customary definitive financing documents reasonably requested by the Financing Parties, in each case required in connection with the Debt Financing and effective as of the Closing;
|
•
|
provide customary and reasonable assistance to ILPT and Merger Sub in obtaining required consents, landlord waivers and estoppels, estoppels and subordination, non-disturbance and attornment agreements from tenants under any leases, ground lease estoppels and consents from fee owners under any facility leases, estoppels and consents pursuant to any PILOT documents and surveys and title insurance as reasonably requested by ILPT or Merger Sub; and
|
•
|
take any other actions reasonably requested by ILPT and necessary to permit the Financing Parties to conduct customary field examinations for third party reports and environmental assessments, and, to the extent appropriate, appraisals of the Monmouth properties.
|
•
|
furnish information with respect to Monmouth and its subsidiaries to the person or group making such Takeover Proposal, subject to prior execution of a confidentiality agreement that is no less restrictive in the aggregate than the confidentiality agreement between Monmouth and ILPT and Monmouth providing to ILPT concurrently or prior to such time all such information; and
|
•
|
participate in discussions or negotiations with the person or group of persons making such Takeover Proposal regarding such Takeover Proposal.
|
•
|
Approval of the Merger by the affirmative vote of the holders of at least two-thirds of the shares of Monmouth Common Stock outstanding on the record date; and
|
•
|
Absence of any law, regulation, temporary restraining order, preliminary or permanent injunction or other order issued by a governmental entity of competent jurisdiction after the date of the Merger Agreement that makes consummation of the Merger illegal or otherwise prohibits the consummation of the Merger.
|
•
|
Accuracy of Monmouth’s representations and warranties, subject to customary materiality and Company Material Adverse Effect qualifications with respect to certain representations and warranties;
|
•
|
Monmouth’s performance or compliance in all material respects with all agreements and covenants required to be performed by it under the Merger Agreement prior to the Closing;
|
•
|
Receipt of a certificate from an executive officer of Monmouth confirming the satisfaction of the two immediately preceding conditions; and
|
•
|
Receipt of a tax opinion of Stroock & Stroock & Lavan LLP or other nationally recognized tax counsel to Monmouth, dated as of the Closing Date, upon which ILPT may rely, to the effect that, for all taxable periods of Monmouth commencing with Monmouth’s taxable year that ended on September 30, 2017, (i) Monmouth has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and (ii) Monmouth’s prior, current and proposed ownership, organization and method of operation have enabled Monmouth to continue to meet the
|
•
|
Accuracy of ILPT’s and Merger Sub’s representations and warranties, subject to customary materiality and Parent Material Adverse Effect qualifications with respect to certain representations and warranties;
|
•
|
ILPT’s performance or compliance in all material respects with all agreements and covenants required to be performed by it under the Merger Agreement prior to the Closing; and
|
•
|
Receipt of a certificate from an executive officer of ILPT confirming the satisfaction of the two immediately preceding conditions.
|
(a)
|
by mutual written consent of ILPT and Monmouth;
|
(b)
|
by either ILPT or Monmouth, if the Merger is not consummated on or before the Outside Date of May 5, 2022, provided that a party whose breach of any of its regulatory efforts obligations has been a principal cause of the failure of the Merger to be consummated by the Outside Date may not invoke this termination right;
|
(c)
|
by either ILPT or Monmouth, if, after the date of the Merger Agreement, 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 has become final and non-appealable, provided that a party whose breach of any of its regulatory efforts obligations has been a principal cause of such order or action may not invoke this termination right;
|
(d)
|
by either ILPT or Monmouth, if the approval of the Merger by Monmouth’s common shareholders is not obtained upon a vote taken thereon at a meeting of Monmouth’s shareholders (or at any adjournment or postponement thereof);
|
(e)
|
by either ILPT or Monmouth, if the other party has breached or failed to perform any of its representations, warranties, covenants or agreements contained in the Merger Agreement, and such breach or failure to perform would result in a failure of a closing condition with respect to representations and warranties and covenants, generally subject to a 45 day cure period, provided that a party may not invoke this termination right if it is then in material breach of any representation, warranty, covenant or agreement under the Merger Agreement;
|
(f)
|
before the approval of the Merger by Monmouth’s common shareholders, by ILPT, if Monmouth’s board of directors or any committee thereof effects a Recommendation Withdrawal, fails to recommend against any then-pending tender or exchange offer that constitutes a Takeover Proposal within certain specified time periods, or, upon ILPT’s written request, fails to reaffirm, upon certain specified circumstances and within certain specified time periods, its recommendation that Monmouth’s common shareholders approve the Merger; or
|
(g)
|
before the approval of the Merger by Monmouth’s common shareholders, by Monmouth in order to enter into a definitive agreement with respect to a Superior Proposal, in accordance with the conditions described under “The Merger Agreement—Nonsolicitation and Recommendation Withdrawal” above.
|
•
|
Annual Report on Form 10-K for the year ended September 30, 2021;
|
•
|
Current Reports on Form 8-K filed on October 7, 2021, October 18, 2021, November 5, 2021, November 8, 2021, and December 6, 2021 (other than documents or portions of those documents not deemed to be filed); and
|
•
|
Proxy Statement for Monmouth’s 2021 Annual Meeting of Shareholders on Schedule 14A, filed with the SEC on November 15, 2021.
|
|
| |
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If to Parent or Merger Sub, to:
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c/o Industrial Logistics Properties Trust
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255 Washington Street
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Newton, MA 02458
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Attention:
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John G. Murray
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Email:
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jmurray@rmrgroup.com
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INDUSTRIAL LOGISTICS PROPERTIES TRUST
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By:
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/s/ John G. Murray
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Name:
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John G. Murray
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Title:
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President and Chief Executive Officer
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MAPLE DELAWARE MERGER SUB LLC
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By:
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/s/ John G. Murray
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Name:
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John G. Murray
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Title:
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President and Chief Executive Officer
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
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By:
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/s/ Michael P. Landy
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Name:
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Michael P. Landy
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Title:
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President and Chief Executive Officer
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J.P. MORGAN SECURITIES LLC
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(i)
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CSCA reviewed the Company’s (i) audited financial information for the twelve-month periods ended September 30, 2018, 2019, and 2020, respectively, (ii) a draft of the unaudited financial information for the three-month and twelve-month periods ended September 30, 2021, and (iii) projected financial information relating to the business, earnings, cash flow, assets, liabilities and capitalization. All of the foregoing information was prepared and provided to us by Company management;
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(ii)
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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, and the Quarterly Report on Form 10-Q and related supplementary information for each of the fiscal quarters ended June 30, 2021, March 31, 2021, and December 31, 2020;
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(iii)
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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;
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(iv)
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CSCA reviewed drafts of the Merger Agreement, the most recent draft dated November 4, 2021, and the Disclosure Schedules thereto, (collectively, the “Merger Documents”);
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(v)
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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, all as CSCA deemed relevant to its analysis;
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(vi)
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CSCA reviewed the terms, to the extent publicly available, of certain comparable transactions, and compared such terms to the terms of the Merger, all as CSCA deemed relevant to its analysis;
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(vii)
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CSCA reviewed the stock price history of each of the Company and compared such prices to the terms of the Merger, all as CSCA deemed relevant to its analysis;
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(viii)
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CSCA performed various financial analyses as CSCA deemed appropriate, using generally accepted analytical valuation methodologies; and
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(ix)
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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 REITs, the industrial real estate sector, as well as its experience in connection with similar transactions and securities valuation generally.
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Very truly yours,
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/s/ CSCA Capital Advisors, LLC
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CSCA Capital Advisors, LLC
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