City Office REIT, Inc. (NYSE: CIO), a prominent real estate investment trust specializing in office properties across high-growth markets in the United States, announced it has entered into a definitive merger agreement with MCME Carell Holdings, in a transaction valued at approximately $1.1 billion. Under the terms of the agreement, MCME Carell will acquire all outstanding City Office shares for $7.00 per share in cash, providing shareholders with a substantial premium of 26% over the last closing price and 39% over the 90-day VWAP.

This landmark transaction, unanimously approved by City Office’s Board of Directors, comes as the office property sector faces prolonged turbulence spurred by remote work trends, tightening credit conditions, and heightened investor caution toward office assets. The transaction price, which includes the assumption of City Office’s debt and preferred stock redemption, signals significant consolidation and strategic repositioning within the REIT landscape.

Deal Terms and Strategic Rationale

The acquisition rests on several key conditions, including the sale of City Office REIT’s Phoenix portfolio, approval by company shareholders, and customary closing requirements. The transaction is expected to close in the fourth quarter of 2025. Notably, the buyer—MCME Carell Holdings, affiliated with Elliott Investment Management and Morning Calm Management—will not require new financing for the completion of the deal. Upon closure, City Office REIT will transition from a publicly traded to a privately held entity, and its shares will be delisted from the NYSE.

James Farrar, CEO of City Office REIT, underscored the significance of the deal: “After an extensive review of strategic alternatives, we believe this transaction maximizes value for our shareholders in a challenging environment for U.S. office real estate.” Similarly, Mukang Cho, CEO of Morning Calm Management, highlighted their confidence in the long-term potential of the office sector, stating, “This opportunity underscores our partnership’s belief in the sector’s recovery and commitment to acquiring high-quality assets in attractive, fast-growing markets.”

Holders of City Office’s 6.625% Series A Cumulative Preferred Stock will receive cash equal to $25.00 per share, plus any accrued and unpaid distributions up to the closing date. The company will maintain its previously declared quarterly dividend but will suspend future dividends on its common shares, reflecting industry caution and focus on capital preservation preceding the deal’s completion.

Industry Context: Navigating Persistent Headwinds

The office real estate sector has faced dramatic headwinds since the onset of the COVID-19 pandemic, with remote and hybrid work continuing to hinder occupancy rates and rental income. According to commercial real estate services firm JLL, U.S. office vacancy rates reached a record high of 20.6% in Q2 2025, up from 16.3% in Q2 2022. Major metropolitan markets in the Sun Belt, such as Dallas, Atlanta, and Phoenix—where City Office has significant holdings—have sputtered due to subleasing waves and delayed return-to-office policies.

REITs focused exclusively on office buildings have seen steep corrections. The FTSE Nareit Office Index, a gauge of public office REIT performance, declined by over 18% in the 12 months preceding July 2025. Larger REITs such as SL Green Realty and Boston Properties embarked upon asset sales, dividend cuts, and portfolio repositioning to shore up financial flexibility. Analysts note that privately-backed takeovers, like that of City Office, could become more commonplace as undervalued assets attract private capital with longer investment horizons.

Buyer Profile: MCME Carell, Elliott, and Morning Calm Management

MCME Carell Holdings is an investment vehicle jointly controlled by Elliott Investment Management, L.P.—one of the world’s oldest and largest multistrategy investment firms with $72.7 billion in assets under management—and Morning Calm Management, a commercial real estate credit and special situations investment firm overseeing approximately 10 million square feet of commercial property. Both firms have previously signaled strategic interest in U.S. real estate, leveraging scale, capital, and operational expertise for turnaround assets and underutilized sectors.

The partnership’s focus on the Sun Belt aligns with ongoing demographic and business migration trends propelling long-term real estate demand in states such as Texas, Arizona, and Florida, despite short-term sector challenges.

Next Steps, Shareholder Implications, and Market Outlook

The merger is contingent on several milestones: successful shareholder vote, regulatory approvals, and the planned divestiture of City Office’s Phoenix portfolio, which remains a significant step in optimizing balance sheet resources. Proxy statements detailing transaction terms will be filed with the SEC and sent to shareholders in advance of a special meeting to approve the sale. Upon completion, both City Office common and preferred shares will be delisted, marking the end of an era for a company that controlled 5.4 million square feet of predominantly Sun Belt office space as of mid-2025.

For shareholders, the merger offers immediate liquidity at a substantial premium, sheltering investors from ongoing volatility in public office real estate equities. For the broader market, the move is indicative of larger-scale repositioning among public REITs and sustained private equity interest in discounted office assets—potentially setting the stage for future cycles of redevelopment, repurposing, or eventual sector rebound.

Advisors on the deal include Raymond James & Associates and Jones Lang LaSalle Securities for City Office, DLA Piper and Hogan Lovells as legal counsel, Eastdil Secured as financial advisor for the buyer, and Gibson Dunn & Crutcher LLP as buyer’s counsel.

Conclusion

The acquisition of City Office REIT by MCME Carell for $1.1 billion reflects the ongoing transformation and volatility facing the office sector in the United States. As the company transitions to private ownership, the deal highlights strategic realignment, rising investor interest in distressed and repositioned assets, and the persistent influence of macroeconomic headwinds on commercial property markets. Market participants will closely watch upcoming shareholder votes and regulatory filings for further developments in the REIT M&A landscape.