Luxor also opposes the transaction for reasons related to the compensation structure at ARCT. Prior to its public listing, ARCT was an externally-managed, private REIT with a promote structure to reward the external manager (essentially the current management team of ARCT). As part of the public listing process, ARCT converted the external manager to an internal manager, thereby doing away with the promote concept for existing management. In its place the former ARCT management company was awarded a one-time payment for the "value" it would create for ARCT shareholders over the 180 day-period post ARCT's IPO listing. This "value" created was defined as the difference between the Strike Price and $9.81 per ARCT share, with the "Strike Price" defined as the weighted average trading price for ARCT shares for the 30-day period commencing on August 28, 2012[iv]. Had Realty Income stock appreciated on news of the highly accretive transaction with ARCT, management of ARCT would have profited materially, drawing into question, to Luxor, the motivations of the merger with Realty Income particularly in light of the fact that previous overtures by Realty Income to acquire and/or merge with ARCT had been repeatedly rejected.[v]
Luxor sees no compelling reason as a shareholder of ARCT to support the proposed merger in its current form.
[i] Realty Income investor presentation, September 6, 2012, pages 6 and 15.[ii] Realty Income investor presentation, September 6, 2012, page 15.[iii] ARCT investor presentation, June 2012, page 6.[iv] ARCT 10-Q for the period ending June 30, 2012, page 18.[v] ARCT and Realty Income joint proxy statement, October 1, 2012, pages 50-61.
CONTACT: Norris Nissim, General Counsel of Luxor Capital Partners, LP, +1-212-763-8041 SOURCE Luxor Capital Group, LP