DEFM14A: City Office REIT to Merge with MCME Carell for $7.00 Cash Per Share

City Office REIT, Inc. stockholders are invited to a special meeting on October 16, 2025, to approve an all-cash merger with MCME Carell Merger Sub, LLC at $7.00 per share.

Summary

• A special meeting of stockholders is scheduled for October 16, 2025, at 10:00 a.m. Pacific Time, at the company's corporate office in Vancouver, BC.
• Stockholders will vote on approving the Agreement and Plan of Merger, dated July 23, 2025, by and among the Company, MCME Carell Holdings, LP (Parent), and MCME Carell Merger Sub, LLC (Merger Sub).
• Upon the closing of the transaction, City Office REIT will merge with and into Merger Sub, with Merger Sub surviving as a wholly-owned subsidiary of Parent.
• Each issued and outstanding share of common stock will be converted automatically into the right to receive $7.00 per share in cash, without interest, and subject to deduction for any required withholding tax.
• The Board of Directors has unanimously approved and declared the Merger Agreement and the Merger advisable and in the best interests of the Company and its stockholders.
• The Merger Proposal must be approved by the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote.
• The record date for stockholders entitled to notice of, and to vote at, the Special Meeting is September 5, 2025.
• Outstanding shares of Series A Cumulative Redeemable Preferred Stock will be redeemed for $25.00 per share in cash plus any accrued and unpaid distributions.
• Restricted Stock Unit (RSU) Awards and Performance Stock Unit (PSU) Awards will automatically become fully vested and converted into cash based on the $7.00 per share consideration.
• The total amount of funds necessary to complete the Merger, the sale of the company's Phoenix Assets, and other contemplated transactions is approximately $1.1 billion.
• Financing for the merger includes an equity commitment of up to $275 million from Elliott Investment Management L.P. and a debt financing commitment of up to $400 million from affiliates of Apollo Global Real Estate Management, L.P.
• The $7.00 per share Common Stock Merger Consideration represents a premium of approximately 26.0% over the closing price on July 23, 2025, and an approximately 39.0% premium to the volume weighted average share price over the previous 30 days prior to the announcement.

Sentiment

Score: 8

Explanation: The proposed all-cash acquisition at $7.00 per share represents a substantial premium (26.0% over the last closing price and 39.0% over the 30-day VWAP) for City Office REIT stockholders. Given the challenging and uncertain market conditions in the office REIT sector, as highlighted by the company's own board, this offer provides immediate and certain liquidity and value. The unanimous board approval and fairness opinions from financial advisors further support the positive sentiment. While there are standard risks associated with any merger, the certainty of cash and premium offered outweigh the risks of remaining an independent public entity in a volatile market.

Positives

• The Common Stock Merger Consideration of $7.00 per share in cash represents a premium of approximately 26.0% over the closing price on July 23, 2025, the last full trading day prior to the announcement.
• The $7.00 per share also represents an approximately 39.0% premium to the volume weighted average share price on the NYSE over the previous 30 days prior to the announcement.
• The merger provides holders of common stock with significant, immediate, and certain cash value and liquidity upon closing, compared to alternative strategic transactions considered.
• The Board believes the merger is more favorable to stockholders than other strategic alternatives, including remaining an independent public company or liquidating, considering the significant risks, uncertainties, longer timelines, and costs associated with those alternatives.
• The Common Stock Merger Consideration was the result of arms-length negotiations, indicating a fair process.
• The Board believes there is a limited universe of potential third parties with the financial ability to acquire the Company at an attractive valuation, and the primary alternative bidder (Bidder A) failed to secure required financing.
• A private company might be able to realize more value from the company's business than a public company, potentially allowing for a higher acquisition price, through higher leverage for growth, absorbing near-term dilution from capital expenditures, and funding developments without relying on equity capital market volatility.
• The Board received oral and written fairness opinions from JLL Securities and Raymond James, stating that the $7.00 per share consideration is fair from a financial point of view to common stockholders.
• The company retains the right to terminate the Merger Agreement under certain circumstances to enter into a definitive agreement for a Superior Proposal, upon payment of a termination fee.
• The Board has the right under the Merger Agreement to change, withhold, qualify, or withdraw its recommendation under certain circumstances.
• The merger is subject to the approval of common stockholders, allowing them to reject the merger if a higher offer were to be made prior to the Special Meeting.

Negatives

• The company is restricted from soliciting competing acquisition proposals, and the Company Termination Fee and Parent's right to match a Superior Proposal could deter other bidders.
• Following the merger, the company will no longer exist as an independent public entity, and existing stockholders will not participate in any future appreciation in the value of the common stock.
• There is a risk that the Common Stock Merger Consideration may not be as attractive as future appreciation, depending on the company's future performance and the inherent uncertainty and volatility of its business plan's projections.
• The merger might not be consummated in a timely manner or at all, leading to potential disruption and costs.
• Restrictions on the conduct of the company's business prior to the completion of the merger could delay or prevent the company from undertaking new business opportunities.
• Under the terms of the Merger Agreement, the company is not permitted to make, declare, or pay regular quarterly cash dividends on common stock.
• The receipt of the cash consideration in the merger will be a taxable transaction for U.S. federal income tax purposes for stockholders.
• Under Maryland law, stockholders are not entitled to appraisal rights, dissenters' rights, or similar rights of an objecting stockholder in connection with the merger.
• Disruptions from the merger, including the ability of certain counterparties to terminate or amend contracts upon a change of control, could harm the company's business and its ability to retain and hire key personnel.
• Potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger (or failure to complete) and potential business uncertainty during the pendency of the merger could affect the company's financial performance.
• Significant costs are involved in connection with entering into the Merger Agreement and completing the transactions, along with substantial management time and effort and related disruptions to business operations.
• The company has a substantial amount of outstanding indebtedness, which may affect its ability to raise debt or equity on reasonable terms to refinance, potentially leading to default and cross-default provisions.
• Systemic changes in demand for office real estate, including work-from-home trends, reduced utilization, elevated tenant downsizing, and future technology gains from artificial intelligence, could materially and adversely affect the company's financial condition, results of operations, cash flow, liquidity, and performance.

Risks

• The ability to complete the Merger on the anticipated terms and timing, or at all, including obtaining the required Company Stockholder Approval and satisfying other conditions to completion.
• Potential litigation relating to the Merger that could be instituted against the company or its directors, managers, or officers, including the effects of any outcomes related thereto.
• The risk that disruptions from the Merger will harm the company's business, including current plans and operations, during the pendency of the Merger.
• The ability to retain and hire key personnel.
• Potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger.
• Legislative, regulatory, and economic developments.
• Potential business uncertainty, including changes to existing business relationships, during the pendency of the Merger that could affect the company's financial performance.
• Certain restrictions during the pendency of the Merger that may impact the company's ability to pursue certain business opportunities or strategic transactions.
• Unpredictability and severity of catastrophic events, including acts of terrorism, outbreaks of war or hostilities, or the COVID-19 pandemic, as well as management's response to any of the aforementioned factors.
• The possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• The occurrence of any event, change, or other circumstance that could give rise to the termination of the Merger, including in circumstances requiring the Company to pay a termination fee.
• The company's ability to maintain its status as a REIT through the Effective Time.
• The company's exclusive remedy against the counterparties to the Merger Agreement with respect to any breach is limited to seeking payment of the Parent Termination Fee in the amount of $35 million, which may not be adequate to cover damages.
• Additional risks and factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, as updated in subsequent Quarterly Reports on Form 10-Q and other reports filed with the SEC.

Future Outlook

The company anticipates the merger will be completed in the fourth quarter of 2025, assuming stockholder approval and satisfaction of other conditions. The Board believes the all-cash offer provides immediate and certain value, mitigating risks associated with remaining an independent public company in a challenging office real estate market. The company's financial projections extend through 2030, showing expected cash flow and EBITDA, but these are subject to significant uncertainties and are not necessarily indicative of actual future results.

Management Comments

• "The Board recommends that you vote FOR the Merger Proposal and FOR each of the other proposals to be voted on at the Special Meeting." James Farrar, Chief Executive Officer and Director.
• "Your vote is very important regardless of the number of shares that you own." James Farrar, Chief Executive Officer and Director.
• "On behalf of the Board, thank you for your continued support." James Farrar, Chief Executive Officer and Director.
• Directors and executive officers have informed us that they intend to vote the shares that they own (approximately 4.3% of total combined voting power) in favor of the Merger Proposal, the Advisory Compensation Proposal, and the Adjournment Proposal, although they have no obligation to do so.

Industry Context

The office real estate sector has faced significant challenges, including the impact of COVID-19, changes in tenant behavior resulting from work-from-home trends, reduced office space utilization, elevated tenant downsizing and move-outs, and higher tenant improvement costs. Access to debt financing has also been difficult, and future technology gains from artificial intelligence could further affect the industry. The Board's decision to pursue a take-private transaction reflects these systemic changes and capital market uncertainties, suggesting a belief that a private entity might be better positioned to navigate these challenges and realize value through higher leverage and long-term growth strategies without public market volatility.

Comparison to Industry Standards

• JLL Securities reviewed publicly available financial and stock market information of four selected comparable REITs: Cousins Properties Incorporated, Highwoods Properties, Inc., Piedmont Realty Trust, Inc., and Brandywine Realty Trust.
• The implied overall low to high estimated EBITDA multiples for selected REITs for calendar year 2026 were 10.0x to 12.0x, with the company's implied per share equity value reference range from this analysis being $4.43 to $7.47.
• The implied overall low to high estimated FFO multiples for selected REITs for calendar year 2026 were 5.0x to 8.0x, with the company's implied per share equity value reference range from this analysis being $4.50 to $7.20.
• The implied overall discount to NAV for selected REITs was (50.0%) to (20.0%) when compared to closing stock price as of July 21, 2025, with the company's implied per share equity value reference range from this analysis being $6.00 to $9.59.
• The implied cap rates for selected REITs implied by their closing stock prices as of July 21, 2025, were 11.5% (low) to 9.5% (high), with the company's implied per share equity value reference range from this analysis being $4.91 to $8.23.
• Raymond James analyzed the relative valuation multiples of four publicly traded domestic REITs with market capitalizations below $5 billion: Highwoods Properties, Inc., Brandywine Realty Trust, Piedmont Realty Trust Inc., and Franklin Street Properties Corp. (excluding Franklin Street for FFO/AFFO multiples due to limited analyst coverage and negative estimates).
• Raymond James's analysis of implied cap rates for comparable companies ranged from 8.5% to 11.6%, with implied equity values per share from this analysis ranging from $5.01 to $10.68.
• Raymond James's analysis of 2025E FFO multiples for comparable companies ranged from 5.3x to 9.1x, with implied equity values per share from this analysis ranging from $5.63 to $9.71.
• Raymond James's analysis of 2026E FFO multiples for comparable companies ranged from 5.3x to 8.6x, with implied equity values per share from this analysis ranging from $4.81 to $7.74.
• Raymond James's analysis of 2025E AFFO multiples for comparable companies ranged from 11.5x to 14.9x, with implied equity values per share from this analysis ranging from $4.17 to $5.39.
• Raymond James's analysis of 2026E AFFO multiples for comparable companies ranged from 9.0x to 14.7x, with implied equity values per share from this analysis ranging from $2.34 to $3.82.
• The merger consideration of $7.00 per share falls within or above the lower end of the implied equity value ranges derived from these comparable analyses, and represents a significant premium to recent trading prices, suggesting a favorable outcome for shareholders compared to public market valuations of similar entities.

Management Changes

Corporate Governance

Legal Proceedings

• Potential litigation relating to the Merger could be instituted against the company or its directors, managers, or officers.
• The company will give Parent the opportunity to participate in (but not control) the defense and settlement of any stockholder litigation against the company and/or its officers or directors relating to the Merger.
• The company will not enter into any settlement agreement in respect of any stockholder litigation relating to the Merger without Parent's prior written consent.

Related Party Transactions

• The company's directors and executive officers have certain interests in the Merger that are different from, or in addition to, those of stockholders generally, including accelerated vesting of RSU and PSU awards and severance benefits.
• A senior member of the Raymond James deal team representing the Company has invested approximately $600,000 in funds affiliated with Parent.
• Another senior member of the Raymond James deal team is a co-investor in a building managed by funds affiliated with Parent.

Stakeholder Impact

• **Shareholders (Common Stock)**: Will receive $7.00 per share in cash, representing a significant premium over recent trading prices, but will no longer participate in any future appreciation of the company's value. They do not have appraisal rights.
• **Shareholders (Preferred Stock)**: Will receive $25.00 per share plus accrued and unpaid distributions, but their preferred shares will be redeemed. They do not have appraisal rights.
• **Executive Officers**: Will receive accelerated vesting of RSU and PSU awards and severance benefits upon a severance-qualifying termination, creating interests that differ from general stockholders.
• **Employees**: Continuing employees will receive a base salary, annual cash bonus opportunity, and other benefits (excluding equity-based compensation) no less favorable for a period of 12 months following the closing. Service credit for eligibility, vesting, vacation, and severance will be recognized.
• **Directors**: Will be indemnified and held harmless for six years after the merger and will be covered by a prepaid tail policy for directors and officers liability insurance.
• **Lenders**: Parent expects to assume or prepay outstanding indebtedness under the company's unsecured credit facility, term loan, and certain mortgage loans. Obtaining certain loan consents is a condition to closing for specific properties.
• **Company as an entity**: Will cease to exist as an independent public company, merging into a wholly-owned subsidiary of Parent, transitioning to a private entity structure.

Next Steps

• A special meeting of stockholders will be held on October 16, 2025, to vote on the Merger Proposal, Advisory Compensation Proposal, and Adjournment Proposal.
• If approved, the merger is anticipated to be completed in the fourth quarter of 2025.
• The company will cooperate with Parent to delist common and preferred shares from the NYSE and deregister under the Exchange Act as promptly as practicable after the Merger Effective Time.
• The sale of the Pima Center (one of the Phoenix Assets) is expected to close later in 2025.
• Parent will cause the Surviving Entity to indemnify and hold harmless former directors and officers for six years after the Merger Effective Time.
• The company will purchase a six-year prepaid tail policy for directors and officers liability insurance at or prior to the Merger Effective Time.
• The company will obtain resignations effective as of the Merger Effective Time from each director and officer, if requested in writing by Parent.
• The company (or its applicable affiliate) will terminate any Company 401(k) Plan and fully vest all participants no later than one business day prior to the Closing Date, unless otherwise notified by Parent.

Key Dates

Recommendation

The proposed all-cash acquisition at $7.00 per share represents a substantial premium (26.0% over the last closing price and 39.0% over the 30-day VWAP) for City Office REIT stockholders. Given the challenging and uncertain market conditions in the office real estate sector, as highlighted by the company's own board, this offer provides immediate and certain liquidity and value. The unanimous board approval and fairness opinions from two independent financial advisors further validate the financial attractiveness of the deal. While there are risks associated with merger completion, the significant premium and the current industry headwinds make this a compelling exit for shareholders, suggesting a 'buy' for those looking to capture the premium before the merger closes.

Keywords

City Office REIT, CIO, MCME Carell Holdings, Merger, Acquisition, Real Estate Investment Trust, REIT, Office Properties, Cash Acquisition, Stockholder Vote, SEC Filing, Corporate Governance, Financial Analysis, Elliott Investment Management, Morning Calm Management, Proxy Statement