In the latest REIT-eats-REIT deal, Sam Zell's Equity Commonwealth is acquiring Monmouth Real Estate Investment Corp. in an all-stock transaction valued at about $3.4B. The combined entity will have a market cap of about $5.5B.

Monmouth shareholders will receive 0.67 shares of Equity Commonwealth for every share of Monmouth stock they own, according to EQC's most recent filing with the Securities and Exchange Commission. That is about $19.40 per Monmouth share, based on the price of Equity Commonwealth at the close of trading on Tuesday.

Monmouth is an industrial real estate specialist with a portfolio of 120 net-leased, single-tenant properties totaling 24.5M SF. The company has also inked deals to acquire six more properties totaling 1.8M SF that will close this year and in 2022.

Most of Monmouth's properties are under 10 years old, with an average lease period of 7.4 years. FedEx is Monmouth's major tenant, occupying 63 of the properties.

"With the opportunity to acquire this portfolio, to match it up with the cash we have available to us and, frankly, a superior real estate-related management team, we really felt that [with] the base this portfolio provided, we'd have the flexibility ... to add significant value going forward," Zell, who is Equity Commonwealth's chairman, said during a conference call discussing the deal on Wednesday.

"We looked at all kinds of different opportunities, including the disposition of the cash balance and calling it a day on EQC," Zell said. "As a significant shareholder, I looked at those two alternatives, and I'd much rather have a stable base and the opportunity to take advantage of the skill set that has evolved than find myself a recipient of cash, and then have to find another area for investment."

When the deal closes, Equity Commonwealth is expected to have about $2.5B of cash as a war chest to pursue further acquisitions. The company also plans to dispose of its four office properties totaling 1.5M SF, which represent its current real estate holdings, and Monmouth’s portfolio of marketable securities over time, then reinvest the proceeds in acquisitions.

On Tuesday, Chicago-based Equity Commonwealth reported a Q1 2021 loss of $12M, or about 10 cents per share, compared with a gain of $422.8M for the same quarter in 2020, or about $3.35 per share. Funds from operation were a loss of $7.7M, or 6 cents a share, compared with a gain of $8.8M a year earlier, or 7 cents a share.

Zell has led EQC since 2014, when activist investors Corvex Management and Related Cos. were able to remove previous management, citing the company's chronic undervaluation. The company changed its name from Commonwealth REIT to Equity Commonwealth, and Zell moved to sell off most of EQC's properties, thus growing its war chest.