City Office REIT stock jumps 9% after signing $576M asset sale deal

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• City Office REIT (NYSE:CIO) stock climbs 8.6% in after-hours trading after the office landlord agrees to sell all of its holdings in the Sorrento Mesa submarket of San Diego for $576M in two separate agreements.
• The company expects the deal to produce net proceeds of ~$546M, or ~$12.38 per common share. The properties to be sold are unencumbered by debt.
• The sale and redeployment of capital will allow the REIT to elevate the quality of its office portfolio through acquisitions in cities in the South and West with "some of the highest employment and population growth," said City Office CEO James Farrar. "Executing this strategy will create a pathway to enhance our earnings per share, expand our net asset value and strengthen our balance sheet."
• The northern part of the Sorrento Mesa portfolio is scheduled to close in December 2021 for $395M and the southern portion is scheduled to close in February 2023 for $181M. The company can accelerate either closing date to fit with redeployment opportunities, the company said.
• City Office's (CIO) net acquisition of real estate has declined in the last two of the past nine years as seen on its cash flow statement and in the chart below.
• SA contributor True Orion gives four reasons to like City Office REIT (CIO)