Carter Validus Mission Critical REIT II to Internalize Management, Announces Plan to Rebrand as Sila Realty Trust

7/30/20

TAMPA, Fla.--(BUSINESS WIRE)--Carter Validus Mission Critical REIT II, Inc., or the Company, and Carter Validus Operating Partnership II, LP, or the Operating Partnership, today announced that they have entered into a definitive agreement to purchase all assets from Carter Validus REIT Management Company II, LLC, or the Company’s Sponsor, Carter Validus Advisors II, LLC, or the Company’s Advisor, and their affiliates necessary for the operation of the Company’s business, providing for the internalization of external management functions, or the Internalization Transaction. The total consideration for the Internalization Transaction will be paid in cash and consists of approximately $40 million payable over an approximately two-year period, with $25 million to be paid at closing, $7.5 million to be paid on March 31, 2021, and $7.5 million to be paid on March 31, 2022, subject to acceleration in certain circumstances. The Internalization Transaction is expected to close on September 30, 2020, subject to the satisfaction of customary closing conditions.

The terms of the Internalization Transaction were negotiated and unanimously approved and recommended for board approval by a special committee comprised solely of the independent directors of the Company, or the Special Committee. The terms of the Internalization Transaction and entry into related agreements were unanimously approved by the full board of directors of the Company.

The Internalization Transaction is expected to bring various benefits to the Company, including:

  • Cost savings: The Company expects its general and administrative expenses to decrease by approximately $18 million on an annualized basis starting in 2021 primarily because it will no longer pay any acquisition, asset management, construction management, property management or disposition fees to affiliates of the Sponsor.
  • Continuity of management and further alignment of interests with the Company: The Company expects to continue to benefit from the industry expertise provided by its experienced workforce, while doing so under a more efficient cost structure. The Company entered into employment agreements with its current key executive officers, to be effective upon the closing of the Internalization Transaction, providing a seamless transition and clarity as to future senior leadership. A significant portion of the compensation of key executive officers includes equity in the Company, further aligning interests between management and the Company.
  • Preference for internal management structure in traded equity REITs: The Company will be organized in a way that it believes is preferable to equity analysts and institutional investors should its board of directors determine, in the future, to list the Company’s securities on a national securities exchange.

    • “We are excited to embark on this latest evolution of our Company, a natural progression from our merger last year with Carter Validus Mission Critical REIT, Inc., which we believe strengthens our corporate governance by eliminating many perceived conflicts of interest and better aligning the interests of management with those of our stockholders. Furthermore, we expect that the Internalization Transaction will provide substantial cost savings to the Company over time, better situating the Company to explore potential liquidity options in the future,” said Michael Seton, Chief Executive Officer and President of the Company.

    The Company intends to change its name to Sila Realty Trust, Inc. immediately following the closing of the Internalization Transaction. The material terms of the Internalization Transaction are disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2020.

    About Carter Validus Mission Critical REIT II, Inc.

    Carter Validus Mission Critical REIT II, Inc. is a public, non-traded corporation headquartered in Tampa, Florida, that currently qualifies and is taxed as a real estate investment trust that engages in the acquisition of quality income-producing commercial real estate with a focus on data centers and healthcare facilities. As of March 31, 2020, the Company owned 153 real estate properties, consisting of 29 data centers and 124 healthcare properties located in 69 markets across the United States.

    Advisors

    Moelis & Company LLC acted as financial advisor to the Special Committee, Venable LLP acted as legal advisor to the Special Committee, Morrison & Foerster LLP acted as legal advisor to the Company and FPL Associates L.P. acted as an executive compensation consultant to the Special Committee with respect to the employment agreements of key executive officers. Robert A. Stanger & Company, Inc. acted as financial advisor to the Sponsor, Advisor and affiliates and Barnett Bolt Kirkwood Long Koche & Foster, P.A. acted as legal advisor to the Sponsor, Advisor and affiliates.