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ARCP Sells Shopping Center Portfolio to Blackstone

NEW YORK (The Deal) -- American Realty Capital Properties (ARCP) said Wednesday it would sell its shopping center portfolio to Blackstone Group (BX - Get Report) in a $1.975 billion deal that would in part fund the REIT's previously announced purchase of Red Lobster's real estate.

New York-based ARCP said that the properties to be sold were previously slated to be spun off into American Realty Capital Centers Inc. The company in March said it would include 69 shopping centers into that new entity, which will now instead be acquired by Blackstone.

The announcement comes less than a week after ARCP said it would participate in Golden Gate Capital's planned $2.1 billion acquisition of Red Lobster from Darden Restaurants Inc. Golden Gate as part of that deal has agreed to a $1.5 billion sale-leaseback agreement with the REIT.

ARCP said it intends to recycle capital from the sale of the strip mall portfolio to fund the Red Lobster acquisition. The REIT also said that with the Red Lobster purchase it has already hit its 2014 acquisition goal of $3 billion, and is increasing its deal target for the full year to $4.5 billion.

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American Realty chairman and CEO Nicholas S. Schorsch in a statement said the planned spinoff of the shopping malls "created visibility and optionality for ARCP" that the REIT was now capitalizing on.

"We now believe the sale of the multi-tenant portfolio will deliver the best value creation option to our shareholders and serve to enhance the clarity of our single-tenant, net lease investment strategy, further simplifying and rationalizing our business plan," Schorsch said.

ARCP officials estimate the portfolio of 500 Red Lobster locations it is to acquire has a cash capitalization rate more than 100 basis points above the shopping center portfolio. ARCP, an aggressive acquirer of commercial properties who last year bought Cole Real Estate Investments Inc. for $11.2 billion, also announced a secondary offering of 100 million shares of its common stock. The company said it would use the net proceeds of the offering to repay outstanding indebtedness and for other corporate purposes.

This is Blackstone's second large real estate transaction this week, following the firm's Monday deal to sell five office properties in Boston to a consortium led by Oxford Properties Group for $2.1 billion.

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