March 2, 2012
By Gail Kalinoski, Contributing Editor
Looking to “unlock the value of the company” for shareholders, American Realty Capital Trust Inc., the flagship REIT of a New York investment firm, began trading Thursday on the NASDAQ Global Select Market as a publicly traded, triple-net lease REIT. Using the symbol ARCT, it is now the first investment grade triple-net REIT to trade publicly.
Launched four years ago by American Realty Capital as a non-traded publicly listed security, it is one of the larger publicly traded REITs with an anticipated market cap of $2.7 billion, according to company filings. The REIT expected to offer 6.6 million shares at $11.50, generating about $87 million in proceeds to be used to pay down debt and for general capital purposes. It also announced Thursday it was starting a modified “Dutch Auction” tender offer to purchase shares of common stock valued up to $220 million from stockholders. The company will select the lowest price of the shares between $10.50 and $11. The tender offer is expected to expire March 28.
“This is the right time in the market for our investors to unlock the value of the company as a publicly traded company to create value,” chairman Nicholas Schorsch told Commercial Property Executive. “The markets are looking for durable yield that is sustainable and that is relatively tax efficient, and REITs can do that.”
Schorsch pointed to the kinds of companies it has as tenants. Of the 61 companies it now has as tenants, 92 percent are rated and 71 percent are investment grade. The portfolio is 100 percent occupied with 485 single-tenant, free-standing properties consisting of over 15.6 million square feet of space located in 43 states and Puerto Rico. Of that, 77 acquisitions were made in the fourth quarter of 2011 for $283 million, according to the 2011 year-end filing with the U.S. Securities and Exchange Commission. The SEC filing noted that ARCT acquired 224 properties for $1.2 billion with 10.2 million square feet of space throughout the year. The portfolio’s tenants include retail, industrial and office assets considered best-in-class, including FedEx, Walgreens, CVS, the Government Services Administration and Dollar General. The average remaining primary lease term is about 13.5 years.
“These kinds of businesses are not as cyclical as other ones. They are long-term and investment grade,” Schorsch said.
As previously reported by Commercial Property Executive, the decision to publicly list the ARTC shares came after a year of exploring strategic alternatives for the REIT’s future. The choices also included selling the entire portfolio or merging with a third party that was already listed in a national exchange.
Schorsch said the company’s board of directors felt listing shares on NASDAQ was the best option to create value and yield for the shareholders. At the same time it filed plans for the public offering in February, the company also announced it was going to internalize the management services provided by its advisor, American Realty Capital Advisors L.L.C. Company officials said becoming a self-administered, publicly-traded REIT would also maximize shareholder value.
“This is only the second REIT to become public in the last seven months and the other was ours too,” Schorsch said, referring to American Realty Capital Properties, Inc., which the company took public in November 2011.
“It is proof of concept, that the markets are open and capital is open and created a great liquidity opportunity for our investments,” he said.
Under the internalization and listing, Schorsch’s title remains the same but others are changing roles including William Kahane, one of the key executives who built the company and is now its CEO & president. Brian Jones has become CFO & treasurer, and Susan E. Manning, previously controller for several of the ARC’s offerings, now becomes chief accounting officer & secretary.