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Net Lease Sector Endures More Consolidation

The proposed deal with CapLease will provide one of the few missing components for ARCP's growing net lease brand: management. In short, I have often suggested that ARCP would become a great REIT as soon as it builds out a management team and now that ARCP is rolling up LSE's management team, I believe that ARCP has all of the ingredients to become a dynamite dividend brand.

The synergies between ARCP and LSE will provide not only a sound financial structure (ARCP will also increase its percentage of investment grade tenants) but also a fully-integrated operating platform, that in my opinion, has been the missing link for the three-year old REIT.

Also, ARCP has continually paid out dividends (three increases this year) and the impact with the proposed LSE is expected to be highly accretive by around 10%. ARCP's payout ratio is around $.94 and the revised earnings (mid-point guidance of $1.19) forecast will reduce the payout ratio and provide meaningful safety for dividend investors.

The merger is still not official until the end of the "go-shop" period commencing immediately and ending on July 7, 2013. The merger agreement does provide for a termination fee and expense reimbursement of $15 million if CapLease terminates (and elects to accept a superior bid).

At the time of publication, the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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