ARCP Completes Acquisition Of Cole Real Estate Investments

American Realty Capital Properties Inc. (ARCP) has closed its purchase of Cole Real Estate Investments Inc., positioning ARCP as the largest publicly traded net lease real estate investment trust (REIT), according to the company.

Under the terms of the merger agreement, ARCP issued to Cole stockholders 1.0929 shares of ARCP common stock for each Cole share to Cole stockholders who validly elected to receive stock consideration or to those who did not make a valid election, representing 98% of all outstanding Cole shares.

The cash election, which was paid to Cole stockholders who made a valid cash election (which represented approximately 2% of outstanding Cole shares), totaled approximately $147 million paid at $13.82 per share, excluding certain payments to Cole executives who elected cash.

As previously announced, Cole stockholders who received stock consideration became eligible for ARCP's February dividend as record holders on the Feb. 7 record date. Such dividend will be paid out at an annualized rate of $1.00 per share, or a February payment of $0.08333 per share. The annualized dividend of $1.00 per share reflects a $0.06 per share increase effective upon the closing of the transaction.

The merger closed one day after ARCP's successful completion of a $2.55 billion unsecured note offering. The notes offering closed on Feb. 6 and comprised three tranches: three-year, five-year and 10-year notes.

The bond offering was launched in connection with ARCP's receipt of a corporate investment grade credit rating from Standard & Poor's Rating Services (S&P) of ‘BBB-‘ and the reaffirmation of its corporate investment grade credit rating from Moody's Investors Service of Baa3. Both S&P and Moody's issued the same respective investment grade credit ratings on the senior unsecured notes offered in the $2.55 billion offering – one of the largest unsecured bond deals in REIT history.

In connection with the closing of the merger, Thomas A. Andruskevich and Scott P. Sealy Sr. were added to the ARCP board of directors. They will join Leslie D. Michelson and William G. Stanley on a newly created conflicts committee.

The net proceeds from the offering were used to fund the cash consideration, fees and expenses relating to the merger and repayment of Cole's credit facility. The remaining portion of the net proceeds from the offering will be used to repay amounts outstanding under ARCP's senior credit facility.

A portion of the amounts repaid under the senior credit facility are expected to be redrawn to repay approximately $730.0 million of commercial mortgage backed securities and other mortgage obligations.

As a result of the acquisition, ARCP expects approximately $70 million of combined expense synergies and expense savings by the end of the first year.

David S. Kay, president of ARCP, remarks, ‘With Cole in the fold, we will now focus further on de-levering our balance sheet, broadening our unencumbered asset pool and fine-tuning our duration matching, all this to further enhance the durability of our cash flows.’


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