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Cole Credit Property Trust III, Inc. Affirms Commitment To Acquire Cole Holdings; Believes Acquisition Is In The Best Interests Of CCPT III And Its Stockholders

Stocks in this article: ARCP

PHOENIX, March 25, 2013 /PRNewswire/ -- Cole Credit Property Trust III, Inc. ("CCPT III" or the "Company") today filed an investor presentation with the Securities and Exchange Commission ("SEC") providing additional details for why its previously announced acquisition of Cole Holdings Corporation ("Cole Holdings") is in the best interests of CCPT III and its stockholders.  The investor presentation highlights, among other things:

  • CCPT III's Planned Acquisition of Cole Holdings is Expected to Yield Substantial Financial Benefits to CCPT III and its Stockholders
    • CCPT III expects $25 to $33 million of 2013E pro-forma EBITDA contribution from Cole Holdings, excluding any contribution from CCPT II and CCPT III
    • In addition to acquiring a world-class asset management business with a 34-year track record:
      • CCPT III expects to achieve significant savings in overhead costs
      • Cole Holdings is also forgoing 25% of its existing contractual promote
    • CCPT III expects 2013 pro-forma Funds From Operations ("FFO") per share of $0.80 to $0.85; and pro-forma Adjusted Funds From Operations ("AFFO") per share of $0.77 to $0.82
    • CCPT III's Board of Directors has authorized an increase in the Company's dividend to an annualized rate of $0.70 per share, upon closing of the acquisition
    • Expected CCPT III listing in June 2013 provides stockholders with access to liquidity/flexibility to sell or retain shares based on public market value 
  • CCPT III's Special Committee Engaged in a Rigorous, Independent Process and Will Continue to Act in the Best Interests of CCPT III and its Stockholders
    • The acquisition of Cole Holdings was negotiated exclusively by a Special Committee of the CCPT III Board of Directors comprised entirely of independent directors, each of whom has significant REIT industry experience
    • The Special Committee met 50 times over the course of 4 months to evaluate the acquisition and other strategic alternatives
    • To assist it in this process, the Special Committee engaged a full suite of nationally recognized advisors
    • After its review of the Cole Holdings acquisition and other strategic alternatives, including the advice of its advisors, the Special Committee unanimously concluded that the acquisition of Cole Holdings is in the best interests of CCPT III and its stockholders

As the Special Committee has previously stated, it has reviewed the recent unsolicited proposal from American Realty Capital Properties, Inc. (NASDAQ: ARCP) and has determined that the proposed sale of CCPT III is not in the best interests of CCPT III and its stockholders. The CCPT III investor presentation also includes, among other things, additional analysis of ARCP's proposal to acquire CCPT III:

  • ARCP'S Proposal Creates an Unattractive Pro-Forma Business Model
    • A combination of CCPT III and ARCP would bear excessive leverage levels – including an additional $1.2 to $2.4 billion of debt to fund the 20% to 40% cash component of ARCP's proposal – presenting significant risk to equity value
    • The surviving company from ARCP's proposal would continue as an externally managed publicly traded REIT, and there are many examples of externally managed publicly traded REITs that have underperformed their peers
  • ARCP's Proposal is Beneficial to ARCP Stockholders, NOT CCPT III Stockholders
    • The notional value of ARCP's unsolicited proposal represents a 12% DISCOUNT to the per share value of CCPT III that CCPT III stockholders would achieve if CCPT III trades at the average of the comparables ARCP itself identifies
    • Assuming that CCPT III should be valued at ARCP's current estimated implied cap rate of approximately 5.3%, then the notional value of ARCP's proposal represents a 22% DISCOUNT to the implied per share trading value of CCPT III
    • ARCP is trying to use CCPT III to become relevant in the Net Lease space but CCPT III is already a dominant player in the Net Lease space  

Goldman, Sachs & Co. and Lazard serve as financial advisors, and Wachtell, Lipton, Rosen & Katz and Venable LLP serve as legal advisors to the Special Committee of the Board of Directors of CCPT III.  Morris, Manning & Martin, LLP serves as legal advisor to CCPT III.

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