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American Realty Capital Properties And Cole Real Estate Investments Merge To Create World's Largest Net Lease REIT With Enterprise Value Of $21.5 Billion

Stocks in this article: ARCP COLE

NEW YORK and PHOENIX, Oct. 23, 2013   /PRNewswire/ --  American Realty Capital Properties, Inc. ("ARCP") (NASDAQ: ARCP) and Cole Real Estate Investments, Inc. ("Cole") (NYSE: COLE) announced today that they have signed a definitive agreement to merge the two companies (the "Merger Agreement"). The transaction is valued at $11.2 billion and will create the largest net lease REIT with an enterprise value of $21.5 billion. The Merger Agreement has been unanimously approved by the board of directors of each company and is subject to customary closing conditions, including stockholder votes by both companies. ARCP has secured $2.75 billion of fully committed financing from Barclays in connection with the transaction, which is expected to close in the first half of 2014. 

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Transaction Highlights

  • AFFO Growth: Updated ARCP AFFO pro forma 2014 guidance of $1.13 to $1.19 per share, as described in Annex A; target payout ratio of 85% to 90%.
  • Dividend Increase: ARCP dividend per share on closing increases to $1.00.
  • Significant Deleveraging: ARCP net debt to EBITDA ratio declines from 9.1x to 7.7x by year end 2014.
  • Expense Synergies: $70 million of year one expense synergies expected.
  • Scale and Competiveness: 64% larger than the closest comparable net lease REIT. Size and scale create operating and revenue efficiencies, including lower cost of capital, superior growth opportunities and higher investor returns.
  • Portfolio Quality: Superior diversification by asset type, tenancy, industry and geography; 47% investment grade tenancy; 99% occupied; 11 years remaining average lease term.
  • Optimization of Core Capabilities: In addition to the durability provided by the single tenant net lease portfolio, the multi-tenant retail properties coupled with the "vintage" (mid-term) net leased properties provide significant rent growth potential.
  • Cost of Capital Advantages: ARCP's investment grade rating allows for significantly lower cost of financing, which is highly accretive to its overall corporate earnings.
  • Increased Institutional Coverage: Transaction positions ARCP for potential inclusion in the S&P 500.

Best-in-Class Property Portfolio As a result of the merger, ARCP is expected to solidify sector leadership among net lease REITs with a pro forma combined company portfolio of 3,732 properties leased to over 600 tenants occupying over 100 million square feet in 49 states and Puerto Rico. More than 47% of annualized rents will be from investment grade tenants. ARCP will be 99% occupied with an average remaining lease term of 11 years.  Enterprise value will total more than $21.5 billion, 64% more than its next largest competitor.

Additionally, Cole's Private Capital Management business, a premier net lease REIT sponsor, will remain intact and continue to provide meaningful revenue contribution to ARCP.

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